Barclays has confirmed its interest in acquiring Dutch bank ABN Amro, paving the way for what could be Europe's biggest financial services sector merger.

The UK banking giant said it was in "exclusive preliminary discussions" with ABN Amro about combining the two organisations.

The approach had been trailed in press reports over the weekend, suggesting that Barclays had already made informal approaches to ABN Amro, the Netherlands’ largest bank, which also has branches in 53 countries and owns Chicago bank, LaSalle. An acquisition would also bring Barclays the benefits of ABN’s 28 branches and substantial business in India.

A buy-out could have profound implications for IT operations at the Dutch bank, which announced plans to axe hundreds of IT jobs in October in a bid to rationalise its organisation and improve efficiency after poor third quarter results.

ABN said it would shed more than 500 full-time head office jobs, mainly in its corporate IT and risk departments, through outsourcing, offshoring and redundancies. The bank had already signed a £1.23 billion outsourcing deal – one of the largest in the European financial sector – with Accenture, IBM, Infosys, Patni and Tata Consultancy Services in September 2005.

But as ABN pares down its IT function, Barclays is also reviewing its own IT systems as part of a wider review of operations. It is moving to standardise its infrastructure and platforms, following a rationalisation of its contracts with suppliers last year.

The UK bank has signed a seven-year framework deal with BT, for voice, LAN, WAN and firewall services and extended its business process outsourcing contract with Siemens and an applications development contract with Accenture.

Integration between the two banks’ IT systems may be eased by the fact that both are significant SAP users. The Dutch bank extended its use of the enterprise software in October, switching the management of client account information to SAP for Banking in October. Barclays – which originally selected SAP to replace its financial systems in 1998 – now has a single SAP system providing a transactional platform across its businesses.