Meanwhile, Italy's senate will vote on a budget for 2017 on Wednesday, paving the way for Prime Minister Matteo Renzi to formally step aside by Thursday, according to the Financial Times.
The bank’s shares fell as low as €17.61 per share on the Borsa Italiana, although they recovered to below €18 in afternoon trading.
The Italian government may be forced to intervene to nationalise the bank as hopes of a private-sector recapitalisation wane with the fall of Matteo Renzi. The main potential investor, Qatar's sovereign wealth fund, wants to see what government will emerge before committing capital, according to Reuters.
Executives at the world’s oldest surviving bank had been attempting to find private-sector backers for a €5bn bailout to avoid it going bust before the new year. That has been put in jeopardy by the Prime Minister’s loss in Sunday’s referendum on constitutional reform.
Prime Minister Renzi has since resigned, although he will remain in the post at the request of President Sergio Matarella until the Italian government passes a budget bill for 2017. Investors appear to have greeted his resignation with equanimity, with the FTSE MIB index gaining more than two per cent on Tuesday.
However, the possibility of a snap election and a potential breakthrough for populist anti-euro parties has dented the confidence of possible lenders to Monte dei Paschi.
Shares in the bank have fallen steadily since mid-2014, when they briefly rose to over €800 per share. In the calendar year so far the shares have lost more than 85 per cent of their value.
The bank is weighed down by a €28bn book of non-performing loans (NPLs), where the debtor has missed payments in the last 90 days. The Italian banking system as a whole faces an NPL pile of as much as €350bn.