January 24, 2013 / 2:35 PM / 5 years ago

UPDATE 1-EBA chief seeks more information on Monte Paschi losses

* EBA chief says more cleaning needs to be done at European banks

* Signals there could be changes in the way stress tests are done

* Says derivatives, real estate exposures may need further checks (adds more comments on stress tests, derivatives)

By Emma Thomasson

DAVOS, Switzerland, Jan 24 (Reuters) - The European Banking Authority (EBA) is seeking more information on goings on at Italian bank Monte dei Paschi di Siena, which said on Wednesday it faced losses of as much as 720 million euros ($956 million) on past derivatives trades.

Monte dei Paschi, Italy’s third-largest bank and one of the few in Europe not to meet the EBA’s stress test, already had to ask for 3.9 billion euros in state aid last year to plug a capital hole stemming from its vast government bond portfolio and hedging bets gone wrong.

On Wednesday the Tuscan lender said it was reviewing three more loss-making structured trades related to its lending that only recently came to light.

“I cannot say anything, but I am in contact with relevant authorities for the bank (Monte dei Paschi) to get more information on what is going on,” EBA’s Chairman Andrea Enria told Reuters TV on Thursday.

Enria, who is attending the World Economic Forum in Switzerland, said banks in Europe had been carrying out a lot of writedowns, but more cleaning was needed: “These type of products, derivatives, commercial real estate exposures, are probably still needing some further checks.”

The EBA will conduct its next stress test of EU lenders this year, and Enria signalled changes should be expected.

“The objective of the last stress tests was to boost the capital positions of banks. Now that this boost has occurred, we are moving to a different set up,” Enria said.

“The ECB is coming to the picture as a supervisor for the bulk of banks of the euro area and maybe beyond, and this will mean we have to interact and cooperate with them quite closely, which we are already doing.”

Enria said this is “not an ideal set-up that you would have designed from scratch”.

The focus of the next stress test will be on seeing that banks are moving to implement Basel III, the global accord requiring banks to hold more and better quality capital and cash buffers to withstand shocks.

Basel is being phased in from this month over six years.

Enria said there has not been enough restructuring in the banking industry and there was still too much excess capacity.

“The more restructuring, the more we push the banks to change, the more we will see the banks finance the economy again, to start to lend again,” Enria said. (Reporting by Emma Thomasson, Writing by Lisa Jucca and Huw Jones; Editing by Will Waterman)

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