UPDATE 1-Italy denies trying to accelerate Monte Paschi cash call
* Press report says Bank of Italy wants cash call brought forward to March
* Treasury says time frame of capital hike "not under discussion"
* Monte Paschi one of several Italian banks due to raise cash (Adds shares, background, fund manager)
MILAN, Jan 28 (Reuters) - Italy's economy ministry urged the top shareholder in troubled Monte dei Paschi di Siena to cut its stake and let other investors in, but denied a report that it was trying to bring forward a 3-billion euro share sale at the bank.
A report in La Stampa newspaper said on Tuesday Italian authorities had asked the bank to carry out the cash call in March rather than wait until May as decided by a shareholder meeting.
"The time frame for the capital increase has been decided by the meeting of the bank's shareholders and is not under discussion," the ministry said in a statement.
It said it hoped the Monte dei Paschi foundation, which forced a delay in the capital increase because it needed more time to sell its stake, would "work actively" to do so and let in new partners who want to buy into the rights issue.
The treasury has responsibility for overseeing banking foundations such as Monte dei Paschi's.
The statement came as shares in Monte dei Paschi and other lenders fell sharply for a second day amid fears that more Italian banks will tap investors to boost their capital base.
Last Friday, Banco Popolare became the fourth bank among the 15 Italian lenders undergoing a health check by the European Central Bank to announce plans to raise cash, asking for 1.5 billion euros on the market before the summer.
Aside from Monte dei Paschi, Banca Popolare di Milano and Banca Carige need to raise 500 million and 800 million euros, respectively.
That has increased concern that a crowded market could make the fund raising more difficult.
"I think the liquidity to cover the string of capital hikes that are about to happen is there, it's more a question of getting the balance right on pricing," said Stefano Fabiani, asset manager at Zenit Sgr.
"Of course if there is market turmoil, things become more complicated."
Monte dei Paschi needs the biggest amount of cash as it seeks to avert nationalisation and pay back 4.1 billion euros in state aid it received last year.
However its foundation shareholder, which has a 33.5 percent stake, voted against a management proposal to hold the capital increase as early as January at a shareholder meeting on Dec. 28.
Monte dei Paschi's top management has said that could threaten the rescue of the bank. On Monday Chairman Alessandro Profumo and CEO Fabrizio Viola held talks with Bank of Italy and Treasury officials as well as the head of the Monte dei Paschi foundation. (Additional reporting by Stephen Jewkes and Steve Scherer in Rome, editing by Louise Heavens)
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