The Wall Street Journal: Italy creates $20 billion fund to back troubled banks

Italy’s government has set up a backstop fund to shore up troubled banks, setting the stage for the rescue of troubled Italian lender Banca Monte dei Paschi di Siena SpA.

At a cabinet meeting in the early hours of Friday, the government of Prime Minister Paolo Gentiloni approved the creation of a €20 billion ($20.9 billion) fund to help troubled banks. Shortly afterward, Monte dei Paschi BMPS, -7.48% said it will apply to tap this fund for fresh equity to shore up its balance sheet.

Read:5 things to know about Banca Monte dei Paschi di Siena’s crisis

The government’s decision comes just hours after the Tuscan bank declared that a last-ditch effort to raise capital from private investors has failed.

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