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Monte dei Paschi weighs impact of former executives' conviction

MILAN, Oct 29 (Reuters) - The board of Italian bailed-out lender Monte dei Paschi (MPS) meets on Thursday to discuss the fallout from a conviction verdict for two former top executives.

A person familiar with the matter said the board may decide as early as Thursday to set aside 470 million euros ($555 million) in cash to increase provisions against legal risks.

MPS declined to comment.

Pending legal claims worth some 10 billion euros are one of the main hurdles Italy faces in finding a buyer for the loss-making Tuscan bank it rescued in 2017.

Disregarding the prosecution’s request to acquit, a Milan court recently handed a jail sentence to former MPS CEO Fabrizio Viola and ex-chairman Alessandro Profumo for false accounting in the booking of two derivatives trades.

The defendants deny any wrongdoing and will appeal.

MPS’ sale process has become a bone of contention for Italy’s ruling coalition, pitting the 5-Star Movement against the Treasury, led by prominent Democratic Party member Roberto Gualtieri.

The 5-Star wants the state to hold onto the bank for now to avoid exiting at a loss, while the Treasury has been working to merge it with a healthier peer, party sources have said. The Treasury owns 68% of MPS.

Board members close to the 5-Star wanted to start legal action immediately against Profumo and Viola as a result of their conviction, a move that would require much higher provisioning and deal a blow to the bank’s fragile finances and a bad loan clean-up MPS is working on, three people familiar with the matter said.

However the court has not yet filed the reasoning behind the Profumo and Viola convictions, which usually requires 90 days.

MPS has decided to wait and study the situation, possibly appointing a legal adviser, two of the people said.

To ease potential mergers, MPS aims to complete by Dec. 1 a deal that would rid it of 8 billion euros in problem loans. ($1 = 0.8461 euros) (Reporting by Giuseppe Fonte and Stefano Bernabei in Rome, Valentina Za in Milan; Editing by Jon Boyle)

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