Exclusive: ECB rejects Monte Paschi's request for more time to raise cash - source

MILAN (Reuters) - The European Central Bank has rejected a request by ailing Italian lender Monte dei Paschi di Siena for more time to raise capital, a source said on Friday, in a move that piles pressure on the Italian government to bail out the bank.

The country's third-largest lender, and the world's oldest, had asked for a three-week extension until January 20 to try to wrap up a privately funded, 5 billion euros ($5.3 billion) rescue plan in the face of fresh political uncertainty.

The ECB's supervisory board turned down the request at a meeting on Friday on the grounds that a delay would be of little use and that it was time for Rome to step in, the source said.

The Italian government is expected to intervene to recapitalise the bank to avert the risk of it being wound down. The failure of Monte dei Paschi could threaten the savings of thousands of retail investors, ripple across the wider banking sector and provoke a financial crisis in the euro zone's third-biggest economy.

Italy faces the risk of early elections, and the prospect of an anti-euro party coming to power, after Prime Minister Matteo Renzi quit this week following the heavy defeat of his plan to reform the constitution in a weekend referendum.

($1 = 0.9291 euros)

(Reporting by Reuters bureaus; Writing by Silvia Aloisi; Editing by Pravin Char)