Italy's government received approval from the lower house of parliament to borrow as much as €20 billion as it prepares for a potential banking sector rescue, Reuters reported Dec. 21.

The state may have to bail out Banca Monte dei Paschi di Siena SpA and other troubled lenders later this week, which the €20 billion will be used for, "government sources" told the newswire.

Meanwhile, Monte dei Paschi said Dec. 21 that the Italian bank rescue fund Atlante's planned purchase of bad loans from the bank is subject to a limited contribution by the state to the bank's €5 billion capital raise, which it is trying to complete in order to avoid a bailout or wind-down, Reuters said in a separate report.

The contribution must be no more than €1 billion, and state aid rules must not be triggered, for Atlante to complete its €1.5 billion investment.

Monte dei Paschi has to complete its recapitalization Dec. 31 after the ECB rejected its request for more time.