Schmeichel had been likely to leave the City of Manchester stadium but with Sven Goran Erikkson having been dismissed, new manager Mark Hughes and his assistant Mark Bowen have admitted that they will need a big squad for both UEFA Cup and Premier League matches.
Also, Man City's current number one keeper Joe Hart has yet to sign a new deal with the club and if he were to leave then Schmeichel would be going nowhere.
City have reportedly offered £1m for the 21 year old Dane who was on loan at City last season.