Monte dei Paschi's desperate need for state aid followed an unsuccessful attempt to raise enough capital through private investment. The bank, which has been saddled with non-performing loans, raised 2.5 billion euros from retail and institutional investors, however, was well short of the 5 billion euros required by Thursday afternoon.
BMPS' shares were suspended from trading ahead of the European open on Friday after falling to its lowest share price in the previous session.
The European Central Bank (ECB) had previously rejected a request for BMPS to have its deadline to raise sufficient funds extended to January 20 in early December.
Monte dei Paschi was found to be the weakest of 51 European banks that went through the ECB's stress testing earlier in the year and was given until the end of 2016 to resolve its dire situation or face being wound down.
"Italy is really rather depressing to look at," Paul Donovan, global chief economist at UBS Wealth Management told CNBC on Friday.
"(In Italy, we have) negative bank lending… In a modern capitalist society, if you don't have normal bank lending you don't have normal economic growth, it's that simple," he added.