Dublin-based Depfa bank is to be auctioned off by its German parent Hypo Real Estate.
The sale process will begin in the next few weeks - just five years after HRE was rescued by a German bank guarantee and nationalised.
IFSC-based Depfa found itself on the brink of collapse when short-term finance dried up in the midst of the 2008 financial crisis.
When approving a bailout in 2008, the European Commission ordered HRE to dispose of specialist public finance unit Depfa by the end of 2014.
The sale is seen as an important step towards reprivatising HRE.
Parties rumoured to be interested in the IFSC-based company include private investors and non-European banks.
Citi is organising the sale.
Germany nationalised the stricken real estate lender which collapsed in the aftermath of the Lehman Bros bankruptcy. Hypo Real Estate received €10bn capital injection in the wake of the financial crisis as well as €145bn n liquidity guarantees.
Depfa, which has not underwritten new business since 2009, last year posted a net profit of €59m. Depfa currently has a balance sheet total of around €73bn.
Any buyer would get a large public finance portfolio.
Of Depfa's borrowers, 26pc are regional governments, 24pc public sector enterprises and 22pc sovereigns. 24pc of the portfolio stems from safe-haven Germany and 19pc from the United States while 8pc is made up of Spanish and 5pc Italian debt.
Earlier this year, 'bad bank' Royal Park Investments sold its structured credit portfolio to Lone Star and Credit Suisse for €6.7bn($8.7 billion).
(Additional reporting Reuters)