Carige, which is discussing with the European Commission the size, timing and type of bond to issue, could raise up to 3 billion euros (£2.6 billion) thanks to the guarantee.

"We're confident of receiving a response soon," Tria told parliament.

Italy's populist government has set up a 1.3 billion euro fund to support Carige's bond issuance after the European Central Bank (ECB) put the bank under temporary administration this month following a failed attempt to raise new capital from investors.

The move marked a major about-face by Italy's ruling coalition, which has criticised previous governments for intervening to help troubled banks.

Genoa-based Carige could launch a state-backed bond as soon as next week, daily newspaper Milano Finanza reported earlier on Thursday. The issue's size could top one billion euros with a three-year maturity and a yield of around 2.5 percent, the report added.

Ismael Lecanu, senior portfolio manager at AXA Investment Managers, said he was "very unlikely" to invest in the bonds although some investors could be tempted if they were priced at a marked premium to government debt.

The money in the fund set up by the government could also be used for a so-called precautionary recapitalisation - an injection of capital into a troubled bank that can be permitted under EU rules if the lender is solvent.

That is what happened with Monte dei Paschi, which was bailed out by the Italian government in 2016.

Tria, however, described that scenario - which would require the approval of European authorities - as an "absolutely last resort option."

He said the government favoured a private sector solution for the bank over a recapitalisation.

He said the Italian banking industry was moving towards consolidation.

The ECB is pressing Carige to seek a merger with a stronger rival and finding a buyer is now one of the tasks of the three commissioners appointed to run Italy's 10th-largest bank. So far, however, no Italian bank has shown interest in Carige explicitly.

(The story was refiled to clarify that government favours a private sector solution over a recapitalisation in para 11)

(Reporting by Giuseppe Fonte; Writing by Giulio Piovaccari; Editing by Mark Potter and Susan Fenton)

By Giuseppe Fonte