New Italian Prime Minister Paolo Gentiloni confirmed Tuesday that his government was prepared to come to the aid of the countrys third largest bank if private rescue efforts fail.
"The government is ready to intervene to guarantee the stability of the (banking) institutions," Gentiloni said in a statement to parliament outlining his fledgling administration's priorities.
He added: "We have to guarantee the stability of the banks and citizens' savings."
Gentiloni's statement confirmed earlier signals from the government that it stands ready to help recapitalise the troubled Monte dei Paschi di Siena bank (BMPS), should it fail to raise enough money from private investors to complete a badly needed strengthening of its balance sheet.
The bank, seen as being in danger of failing if it is not recapitalised, needs to raise five billion euros ($5.29 billion) to avoid a state-subsidised rescue.
If that happens there are fears retail savers might suffer losses with EU rules potentially preventing the government from fully covering their losses.