Italy's Banca Carige SpA will use government-backed guarantees on bond issues and will only tap a state-backed precautionary recapitalization as a last resort.

It came after Italy's government passed a decree giving the bank access to a series of state-backed options, including recapitalization if needed.

Carige said the state-backed guarantees will support its medium-term funding. The bank added that its special administrators are due to launch due diligence on its nonperforming exposures, with a view of reducing its NPE ratio to 5% to 10% of total lending, and are renegotiating the terms of a €320 million bond it sold to Italy's deposit guarantee fund in November 2018.

The state-backed precautionary recapitalization will be considered as an additional measure for the protection of customers that would be activated only as a "residual option," Carige added.

Meanwhile, the European Commission and the Italian government are discussing an aid plan for Carige, Reuters reported the same day, citing a spokesperson for the commission.

The ECB recently put the Italian lender under temporary administration after it failed to raise capital.