Italy's Treasury to give Monte Paschi more time to pay interest in cash - paper

MILAN (Reuters) - Italy's Treasury may allow loss-making Banca Monte dei Paschi di Siena (MIL:BMPS) more time to pay interest on a state bailout, to ensure the sum is paid in cash rather than in bank shares, Corriere della Sera reported on Saturday.

Citing sources close to the Treasury, the paper said the Treasury had told the bank it may extend the July 1 deadline for paying 360 million euros $498 million (296.25 million pounds) by a few days.

The Treasury said it was negotiating an agreement with the bank over changing the due date for the payment. Monte dei Paschi declined to comment.

The 540-year-old lender, which received 4.1 billion euros in state aid last year, had agreed with banks underwriting its emergency capital hike that it would pay back the interest in cash rather than shares, preventing Italy's government taking a stake.

Monte Paschi's board approved a proposal on Friday to raise the value of a share sale it is planning by 2 billion euros to 5 billion euros, to help cover any gaps a Europe-wide bank check might find in its finances.

(Reporting by Isla Binnie; Editing by Rosalind Russell)