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BRUSSELS, July 4 (Reuters) - EU state aid regulators approved on Tuesday Monte dei Paschi di Siena's precautionary recapitalisation after the troubled Italian bank agreed to a drastic overhaul including a salary cap on senior managers and the transfer of bad loans to a special vehicle.
The world's oldest bank and Italy's fourth biggest lender has been embroiled in a prolonged state rescue after failing to raise 5 billion euros on the market to shore up its capital.
The European Commission, which last month gave its preliminary approval to the bank's state bailout, said the five-year restructuring would ensure the bank's viability.
As part of the revamp, Monte Paschi will transfer 26.1 billion euros ($29.60 billion) to a privately funded special vehicle on market terms, with the operation partially funded by the Atlante II fund.
It will also change its business model to focus on retail customers, and small- and medium-sized companies.
$1 = 0.8818 euros Reporting by Foo Yun Chee