Italy approves €20bn rescue for banks

Italy’s lower house of parliament and Senate have approved a government request to borrow up to €20bn to underwrite the country’s beleaguered banking sector.

A resolution in favour of the plan was approved in a 389-134 vote, with eight abstentions, in the lower Chamber of Deputies. The Senate also gave the green light in a 221-60 vote, with three abstentions.

The news came as Banca Monte dei Paschi di Siena tumbled on Wednesday amid fears it could run out of liquidity faster than previously expected.

Reports earlier in the day suggested the €10.6bn net liquidity position of the world’s oldest bank is now likely to last only four months, versus a previous estimate of 11 months.

Meanwhile, on Tuesday, the bank was reported to have raised just €500m in a voluntary debt-to-equity offer, which is far below its €5bn target for the end of the year.

The bailout fund is expected to be used to shore up several other struggling banks and help guarantee liquidity in the banking system.