The current so-called GACS scheme, introduced at the beginning of 2016, was conceived to help the country's banks offload their bad loans and expires in March next year.

"Discussions with the European Commission will start in the last quarter of 2018 in order to agree on the characteristics of the scheme and to avoid it being classified as state aid," the government said in the document, adding it would also proceed with the completion of the reform of co-operative and popolari banks.

(Reporting by Agnieszka Flak, editing by Giuseppe Fonte)