Italian Treasury: Italy approves a €20bn bailout plan for its banks

The Italian parliament has approved a government plan for a possible €20bn bailout of the country's banks.

It is likely that the Italian Treasury will have to rescue Italy's third largest lender, Monte dei Paschi, by the end of next week.

The rescue fund will be used to prop up other banks as well.

Earlier, Monte dei Paschi revealed that it could run out of funds by next April, using up nearly €11bn worth of financial assets by then. 

Previously it had said it had the funds to stay afloat for 11 months.

It added that by next May it could burn through even more - €15bn in total.

Founded in 1472 Monte dei Paschi is said to be the oldest surviving bank in the world.

The bank has suspended trading in its shares, which fell sharply again on Wednesday to their lowest level since the bank's stock market flotation in 1999. 

Monte dei Paschi failed a European Union stress test in July because it has billions of euros of risky loans on its books, made to clients who cannot afford to repay them.

The situation has worsened since then.

It has been trying to raise €5bn in fresh capital by the end of the month to stage its own rescue, but so far it has raised only €500m.

If the bank cannot arrange a successful private sector bailout, the Italian government will probably step in.

The funds for that bailout have been approved by both the lower and upper houses of the Italian parliament.

The Italian finance minister, Pier Carlo Padoan, said the impact on savers of a state bail-out would be "minimal or non-existent". 

The new Italian prime minister, Paolo Gentiloni, has vowed not to let the bank fail, for fear that its collapse could topple the rest of Italy's heavily indebted banking sector.