MILAN (Reuters) - Milan prosecutors are investigating charges of market manipulation in relation to a merger deal between Banca Popolare di Milano and Banco Popolare to create Italy's third-largest bank Banco BPM <BAMI.MI>, a court document showed on Friday.


Sources with direct knowledge of the matter said Italy's tax police seized documents on Friday as magistrates look into allegations the banks failed to tell shareholders and investors ahead of the closing of the merger that the European Central Bank had raised objections over loan loss coverage levels at Banco Popolare.


No person is under investigation, the sources said.


In a statement issued later in the day, Banco BPM confirmed the opening of an inquiry but denied any wrongdoing.


"Banco BPM, as well as Banco Popolare and BPM previously, have acted in full respect of the law and have given to the market and shareholders all due information," the bank said.


Banco BPM said the tax police had presented a written request for documents, but denied it had seized any material in the banks' offices.

The written request filed by the tax police did not say the banks had failed to disclose relevant information ahead of the merger, the lender said.

(Reporting by Manuela D'Alessandro and Emilio Parodi; Writing by Francesca Landini; Editing by Ruth Pitchford)