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Monte dei Paschi ups size of cash call to 3 billion euros after 2014 loss

By Silvia Aloisi

MILAN (Reuters) - Monte dei Paschi di Siena has raised the size of a planned capital increase to 3 billion euros ($3.39 billion) to meet tough capital targets set by the European Central Bank after reporting its fourth consecutive annual loss.

The bank, which has been hit by the euro zone debt crisis and a scandal over loss-making derivatives contracts, emerged as the weakest lender in a Europe-wide health check of banks last year.

Last month, sources told Reuters the ECB, the new banking regulator for the euro zone, had asked Monti dei Paschi to raise the size of its capital increase, which was originally set at 2.5 billion euros (£1.8 billion).

The bank said on Wednesday it would have been able to meet the ECB capital target even with the 2.5 billion euros fundraising but decided to increase the amount to have an extra capital buffer.

Monte dei Paschi reported a net loss of 5.3 billion euros for 2014, which is the highest recorded by the bank and brings its total losses since 2011 to 14.6 billion euros.

The loss last year was the result of big writedowns on bad loans, which totalled 7.82 billion euros for the year as the bank set aside cash to cover soured debts at the behest of the ECB.

Monte dei Paschi, the world's oldest bank, said the ECB had said it needed to reach a Common Equity Tier 1 or core capital ratio of 10.2 pct. That level should be met following the completion of the capital plan and be maintained at all time, the bank said.

This core capital ratio, a gauge of financial strength, is below the ratio of 14.3 percent previously indicated by the ECB but above the minimum threshold of 7 percent set by new bank capital rules known as Basel III.

Monte dei Paschi said that, including the capital increase and the planned reimbursement of state loans, its pro-forma CET 1 ratio stood at 11.4 percent at the end of 2014.

But that number had already fallen to 10.7 percent at the start of January, it said in slides posted on its website. On a fully-loaded basis under Basel III, the ratio was 9.7 percent.

The bank also said its current accounts had fallen by 6.4 percent in the three months to December, compared with the previous quarter.

The other Italian bank that still has a capital shortfall to plug, Carige posted a 2014 loss of 544 million euros hit by loan loss provisions and said its capital ratio stood at 8.4 percent at the end of 2014. The lender is planning a 700 million euros rights issue. [ID:nI6N0UV02F]

Also, cooperative lender Banca Popolare dell'Etruria e del Lazio said it had been placed under special administration after a Bank of Italy inspection revealed heavy balance sheet losses from loan writedowns.

(additional reporting by Valentina Za, Stephen Jewkes and Stefano Bernabei. Editing by Jane Merriman)