ISTANBUL/LONDON - General Electric Co has seen interest from several banks to buy its stake in Garanti Bank, Turkish media said, but tough new rules for bank minority stakes might dampen appetite.

The U.S. group -- which is scaling back its hefty GE Capital finance arm -- is in talks with Spain's Banco Santander to offload its 20.85 percent in Turkey's largest listed lender, the reports said on Friday.

A sale of the $3.3 billion stake in Garanti, the most actively traded stock on the Istanbul bourse, would be an opportunity to buy into Turkey's banking sector, dominated by family-owned and state-backed players.

JP Morgan has been mandated for the sale, an investment banking source said, confirming a story in the Haberturk newspaper. JP Morgan declined comment.

Santander declined to comment. But the investment banker, who is familiar with the company, said the euro zone's largest bank was unlikely to be interested because of regulatory uncertainty about minority stakes.

Global finance watchdogs drawing up new rules known as Basel III have suggested excluding minority interests from a bank's common equity, putting pressure on banks to divest minority holdings or buy affiliates outright.

Dogus Group, which already has a 30.5 percent stake in Garanti, could increase its holding, analysts have speculated. Other suitors could come from the Middle East.

Shares in Garanti bank were trading 1.8 percent higher at 5.65 lira at 1413 GMT. Santander was 1.4 percent higher, while the DJ Stoxx index of European banking stocks .SX7P was up about 0.5 percent.

INTESA MENTIONED

Santander has recently said it is not looking to enter new markets. The acquisitive bank has around a third of its business in Latin America, just under a third in Spain, a similar amount in Britain and the rest in Europe.

Still, Santander could be place the Garanti stake in its industrial portfolio, one fund manager said, where it buys stakes to sell for profit further down the line.

Italy's Intesa Sanpaolo  -- which failed to win Garanti Bank in 2004 -- was also interested in the stake sale, business daily Dunya reported, as was an unnamed Gulf-based fund. Intesa declined to comment.

A market source also mentioned HSBC and Standard Chartered as possible buyers. Both banks have large operations in emerging markets and have plenty of cash, having survived the credit crisis relatively unscathed.

But HSBC has typically taken minority stakes only where fuller ownership is restricted, such as in China or India. StanChart has looked at Turkish lender Oyakbank in the past, though the country is on the fringes ot its core market.

Garanti has boomed in recent years to become one of the Turkish banking sector's greatest successes. Its shares rose 143 percent in 2009, outperforming both the index of banking stocks, which rose 116 percent, and the Istanbul index as a whole, as it reported strong profit growth.

GE originally bought a 25.5 percent stake from Dogus Group for $1.6 billion in 2005, before selling part of its holding back to Dogus in 2007. (Additional reporting by Alexandra Hudson in Istanbul, Sonya Dowsett in Madrid, Steve Slater in London and Roberta Giaconi in Milan; Writing by Douwe Miedema; Editing by Will Waterman)