The Italian government and the European Commission agreed on a plan to help banks offload bad debt in a deal that won’t count as state aid because Italy’s backing will be priced at market rates. The agreement was announced Tuesday after a meeting in Brussels between Italian Finance Minister Pier Carlo Padoan and the European Union Competition Commissioner Margrethe Vestager. The price of insurance on Italian debt with the same risk profile will be used as a reference for the guarantees on the bad loans, which will be sold by Italy, the Treasury said Wednesday. The agreement comes after months of negotiations between the Italian government and the Commission, and effectively waters down an original Italian project to create a bad bank vehicle amid concerns by the EU body that disposals could constitute illegal state aid. Italian bank shares have swung wildly over the last 10 days on concerns an agreement may not be reached as bad debt continues to hamper lending growth. “It’s a little odd that the Italian government has wasted some 12 months in reaching an agreement on the ‘bad bank’ which, at the end, will pursue a ‘market price’ mechanism with, it seems, no discount for banks,” said Fabrizio Bernardi, a Milan- based analyst at Fidentiis Equities. The state will guarantee senior tranches of securitized bad-debts, the Italian Treasury said. Pricing on guarantees will be set at a market level based on the credit-default-swap price of Italian issuers that have the same risk as secured notes. The cost of guarantees will increase over time based on market prices and length of recovery process, Treasury said. Banca Monte dei Paschi di Siena SpA, the bank with the highest exposure to bad loans compared with tangible equity, gained as much as 7.3 percent and was up 4.6 percent to 73.5 cents as of 9:55 a.m. in Milan. Banca Popolare di Milano Scarl rose 0.4 percent and Banco Popolare SC fell 0.6 percent. The FTSE Italia All-Share Banks Index fell 0.8 percent compared with a 0.7 percent decrease in the STOXX Europe 600 Banks Index. The plan “should assist Italian banks in the process of securitizing and moving non-performing loans, currently on their balance sheets, to separate, individually managed entities,” the commission said in an e-mailed statement. “Banks will be able to benefit from a state guarantee on the senior tranches of the securitized assets held by such entities,” the commission said. “These state guarantees are to be provided and priced at market terms and therefore will not constitute state aid.”