The Government of Italy has issued a decree aimed at stabilising the troubled lender Banca Carige.

In a statement, the government said that the decision has been taken to enable the bank reduce bad debts and maintain capital ratios.

The decision comes a week after the European Central Bank (ECB) placed the bank under temporary administration.

Banca Carige stabilisation:

The official decree will enable Banca Carige to receive funds from the central bank as well as issue new bonds with state-backed guarantees, Reuters reported.

In addition, the decree will enable the bank to seek precautionary recapitalisation.

Banca Carige will apply for precautionary recapitalisation only if it requires new funds or unforeseen problems, an unnamed source told the news agency. EU authorises such recapitalisation measures only when the bank is financially secure.

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Last week, ECB appointed three temporary administrators and a three-member surveillance committee to take over Banca Carige.

It placed the bank under temporary administration after majority of Banca Carige board members resigned.

The new ECB-appointed board will work to revive Banca Carige as well as consider merger partnerships to ensure continued stability.

In November last year, the Banca Carige received €320m from other Italian peers to meet capital requirements. However, it failed to secure shareholder approval to raise up to €400m through new share issue.

At the end of September 2018, the lender’s capital ratio was 10.8%, above the ECB-mandated minimum threshold of 9.63%.