The government is considering nationalising the 316 Royal Bank of Scotland (RBS) branches currently up for sale with a view to creating a new business lender, the Sunday Times reports.
If no commercial buyer is found for the branches, the paper reports, it would be set up as a standalone bank owned entirely by the taxpayer with the purpose of lending to small businesses.
It would branded Williams & Glyn's, the name of a northern bank bought up by RBS 27 years ago.
RBS is being forced to sell the 316 branches due to European state aid rules after accepting a government bailout during the financial crisis. Santander had been the preferred bidder for the branches, but pulled out last month.
The Sunday Times said the branch network had about 1.8m retail accounts, and about 240,000 small business accounts and 1,200 mid-sized corporate banking relationships - which is equivalent to 5% of the business banking in the UK.
The paper said the government would only take control if all sale options failed and a stock market floatation was not a success. It added it was unclear if the idea breached state aid rules.
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