Shares in Banca Monte dei Paschi di Siena crashed in early trading after warning over its ability to meet its day-to-day expenses.
The bank said it would run out of liquidity in four months time, rather than 11 months as investors had previously thought.
Shares plummeted. Here is the chart:
Investing
The Italian banking crisis is coming to a head after the resignation of former Prime Minister Matteo Renzi earlier this month. Banca Monte dei Paschi, the world's oldest lender and Italy's third-biggest bank, is attempting to raise €5 billion by the end of the year to stay in business.
The sector is carrying more than €300 billion in non-performing loans and may ultimately need an injection of around €52 billion, according to Deutsche Bank analyst Paola Sabbione.
The Italian government decided on Monday to seek parliamentary approval to borrow €20 billion to bailout Monte dei Paschi di Siena as early as this week.