Italy prepares 20 billion euro fund to help ailing banks

Italy's new Prime Minister Paolo Gentiloni said Monday he will ask parliament to approve a precautionary 20 billion euro funding package for the country's troubled banks.

The move comes as Italy's third-largest bank, Monte dei Paschi di Siena (BMPS), tries to raise five billion euros ($5.2 billion) in new private capital to stave off government intervention.

BMPS, the oldest bank in the world, is at the heart of an Italian banking crisis which has cost it over 80 percent of its market capitalisation in the past year.

"It's a precautionary measure. We believe it is our duty to take this measure to protect savings. I hope all the political movements in parliament share this responsibility," Gentiloni told reporters after a cabinet meeting.

BMPS needs to complete the five-billion-euro funding drive by the end of December after the European Central Bank refused to grant its request to extend the deadline to mid-January.