Continental Illinois National Bank is recovering so rapidly from its near-failure last year that the Federal Deposit Insurance Corp. may begin selling its stake in the Chicago bank within two years, FDIC Chairman William M. Isaac said yesterday.

In return for $3 billion of aid -- and the promise of up to $1.5 billion more -- the regulatory agency received stock equivalent to 80 percent of the outstanding shares in what was once the sixth-biggest bank in the United States. Stockholders in the bank could be completely wiped out, depending upon how much the government loses on bad loans it bought from the bank.

Regulators felt they had to rescue Continental to forestall an international financial panic. The bank had $41 billion in assets and a global operation when a worldwide run on its deposits began last May.

Last spring, Isaac said in an interview that he and other regulators believed it would be five years before the government could begin to withdraw its support for the financially troubled institution.

Now, he said, the bank has recuperated so swiftly and depositors are regaining confidence so rapidly that "two years is more than enough time."

Banking sources in Chicago said that Continental Illinois probably could stop borrowing now from the Federal Reserve -- which is lending the bank funds to replace lost deposits -- and sharply reduce its borrowings from a consortium of major banks that joined forces with the Fed to ensure that Continental has enough resources to meet its obligations.

But they said the bank is reluctant to stop borrowing from the Fed until it is confident it will not have to return. Instead of using new deposits to support outstanding loans, Continental is building up its store of cash-like assets such as Treasury bills. These liquid assets can be quickly and easily converted to cash to meet depositors' demands, a Chicago banking source said.

"The last thing they Continental officials want is to announce that they have terminated their Fed borrowing, then have to go back. It would hurt confidence in the institution," a leading Chicago banker said.

In any case, Continental has reduced its borrowings from the Federal Reserve, and sources said that the bank will announce soon that it is reducing the size of the emergency credit line provided by the consortium of 28 major banks. At present, Continental can borrow up to $5.5 billion on the credit line, although its borrowings were averaging about $4.1 billion in January, the last time the bank reported on it.

Isaac said that before the FDIC begins to sell its stake in Continental, it must decide whether it wants to sell its stock in a block to an investor or group of investors -- probably another financial institution -- or sell it to the public at large in a series of offerings.

Isaac, who is expected to leave his position early this summer, said he prefers selling it to the public. He said even a smaller Continental -- the bank has sold off about $10 billion in assets to reduce its funding requirements, get rid of problem loans and raise cash -- remains an important U.S. financial institution and he thinks that public policy would be better served if the big Chicago bank remained independent. A public offering would help achieve that purpose.

He said the agency must make a determination as soon as possible whether it will sell its Continental holdings in a block or in a series of public offerings.

The bank reported an unexpectedly large profit of $37.7 million in the fourth quarter last year -- in large part because it had sold a large portion of its bad loans to the FDIC. The profit would have been higher, Chicago banking sources said, but the bank added heavily to its reserves and wrote off many loans that were still performing but seemed questionable.