VIENNA (Reuters) - There is no need to drag out a decision on how to rescue Italian bank Monte dei Paschi di Siena <BMPS.MI>, European Central Bank policymaker Ewald Nowotny said on Monday, confirming the ECB refused to give the bank more time to recapitalize.


Monte dei Paschi, Italy's third-biggest lender, has said it will press ahead with a plan to raise 5 billion euros ($5.3 billion) on the market by year-end after the ECB's refusal, which adds pressure on the Italian government to provide capital.


"There is a certain general feeling that it would not be good to delay things for too long," Nowotny told a news conference in Vienna.


Italy prefers a market solution to save the bank, but should it fail, a state rescue would require a forced conversion of the bank's bonds into shares, Treasury sources in Rome said on Monday.


Nowotny said that if the bank's management did not succeed in putting together a capital increase in time, one would have to look at the legal options.


Asked if that meant a wind-down of the bank, he said any solution would have to be chosen carefully because the bank's size meant it was systemically relevant.

"I would proceed with a certain caution ...and I think talks are going in that direction," Nowotny told reporters, without elaborating.

(Reporting by Francois Murphy; editing by John Stonestreet)