Monte dei Paschi di Siena announced today its plan to raise €5bn (£4.2bn) of capital by the end of the year had failed.
The bank's board is now expected to approve a request for state aid when it meets later today.
The country's third-largest bank said it failed to secure investors and sell new shares, so it scrapped a debt-to-equity conversion offer that had raised €2bn, Reuters reported. It is returning bonds tendered under the swap.
Monte dei Paschi said it would not pay fees to investment banks that had worked to place its shares or on its planned bad loan sale, including its advisers JPMorgan and Mediobanca.