ECB wants more clarification on BPM-Banco merger plan - source

MILAN (Reuters) - The European Central Bank has asked Banco Popolare and Banca Popolare di Milano for further clarification on their merger plan, a source familiar with ECB thinking said, a move which could again delay a deal announcement.

Banco Popolare and BPM have been in negotiations for months over a tie-up that would create Italy's third biggest bank. But a deal has stalled due to ECB demands for stronger capital and leaner governance.

The two cooperative banks have submitted a revised plan to meet the ECB conditions. The plan includes capital strengthening actions, but the exact amount and mix of measures is still unclear.

Some sources told Reuters they would be worth 1.5 billion euros (1.1 billion pounds) overall and include a capital increase of up to 1 billion euros.

But two other sources said on Tuesday the measures would only total around 1 billion euros and the cash call would only take place if other actions - including issuance of hybrid financial instruments, a private placement to institutional investors and asset sales - did not reach the targeted amount.

"The ECB has not given its green light to the plan yet and is asking for further clarification," the source familiar with the regulator's thinking said.

An Italian source said Banco Popolare's board, which is due to meet on Wednesday, should be able to provide the details requested to win ECB approval.

Prime Minister Matteo Renzi and his economy minister have thrown their weight behind the deal, which could lead to further mergers between Italian banks following reforms aimed at strengthening a fragmented industry and improving profitability.

(Reporting by Luca Trogni, Gianluca Semeraro and Paola Arosio, additional reporting by John O'Donnell; Editing by Mark Trevelyan)