UPDATE 1-Monte Paschi closes derivative trade with Deutsche Bank
* One-off charge of 194 mln euros on 2013 results
* To boost Basel III core capital ratio by 25 bp (Adds details, source on lawsuit, Deutsche Bank confirmation)
MILAN Dec 19 (Reuters) - Italian lender Monte dei Paschi di Siena said on Thursday it had reached a deal to close a loss-making derivative trade with Deutsche Bank, leading to a one-off charge of 194 million euros ($267 million) on its 2013 accounts.
The 2008 deal, known as Santorini, is one of three derivative trades at the heart of a judicial probe into alleged fraud at Italy's third biggest lender. Those trades forced Monte dei Paschi to take a hit of 730 million euros on its 2012 accounts.
As a result of the settlement, Monte Paschi will drop a civil lawsuit against Deutsche Bank, though the Tuscan bank is still seeking damages from two of its former executives over the trade, a legal source close to the matter told Reuters.
Monte dei Paschi is also suing Japanese broker Nomura over a separate derivative trade known as Alexandria.
Monte dei Paschi said in a statement the early closing of the Santorini contract, which involved the purchase of 2 billion euros of long-term Italian government bonds funded by a repo deal, had cost it 525 million euros.
The Siena-based bank said ending the trade would give its Basel III core capital ratio a 25 basis point boost and would have a positive impact on its balance sheet to the tune of 33 million euros a year from 2014 onwards.
Deutsche Bank also confirmed the deal.
"The joint agreement ends the legal dispute regarding these transactions and restores the business relations between Deutsche Bank and Monte dei Paschi", a Deutsche Bank spokesman said.
($1 = 0.7266 euros) (Reporting by Silvia Aloisi in Milan and Arno Schuetze in Frankfurt, editing by Stephen Jewkes and Elaine Hardcastle)
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