Poland's mid-tier lender Alior Bank ALRR.WA, owned by state-run insurer PZU, is in talks to buy its rival Bank BPH BPHP.WA from General Electric (GE.N) and hopes to complete a deal around mid-2016, three banking sources told Reuters.

If the purchase from the U.S. group is successful, it would bolster the broader agenda of the ruling Law and Justice (PiS) party, which aims to regain more control over a banking sector that is 60 percent foreign-owned.

Government officials have signaled that PZU PZU.WA, central Europe's biggest insurance company, should buy more banks as part of this plan.

"Alior plans the bank acquisition transaction during the second or third quarter. The plan assumes that Alior will conduct a rights issue to raise money both for the bank and to strengthen its own capital position," a source familiar with the matter said. Read the full story POLAND's Alior keen to buy Bank BPH from GE (sources)