Italy's competition authority opens probe into Intesa's bid for Monte dei Paschi

ROME, Sept 15 (Reuters) - Italy's competition authority said on Tuesday it had opened an investigation into the bid by Intesa Sanpaolo, Italy's largest bank, to take over smaller peer Monte dei Paschi di Siena.

The antitrust body said its probe was aimed at verifying possible effects of the bid "on competition dynamics in numerous banking and insurance markets at the local and national level."

To try to preempt any antitrust problems on the banking side, Intesa has already agreed to dispose of half of MPS's branches.

However, the authority said in its document that preliminary checks indicated the acquisition of MPS by Intesa could still raise competition issues in 20 Italian provinces regarding deposits, and in 17 provinces regarding small business lending.

The antitrust authority already conducted a preliminary assessment after Intesa filed for approval of the takeover offer in June.

That review threw up potential issues in 72 provinces regarding household lending, it said.

If successful, Intesa's €35 billion cash-and-stock bid for MPS will also hand it a 13% stake in Generali, Italy's biggest insurer.

Intesa competes with Generali on life insurance.

The antitrust authority said it could be ruled out that Intesa would get de facto control of Generali through the transaction.

Intesa has already said it will not interfere with the running of Generali, but it wants to benefit from capital relief rules on its Generali stake. To do so, it needs to have a presence on the insurer's board.

The competition watchdog said there was a chance that Intesa's "incentive to compete aggressively against Generali would be significantly weakened" if the merger went through.

"The existence of (a) structural and governance link ... could make coordination between the two institutions easier, as well as increase the incentive to engage in coordinated conduct," it said.

Given Intesa's "significant presence in Generali's governance", the watchdog said its assessment "will also consider potential competition concerns arising from the risk of sensitive information being exchanged between the two competitors."

(Reporting by Valentina Za, editing by Gavin Jones)