ROME (Reuters) - Italy’s Treasury has started discussing with European Union authorities a plan to spin off non-ordinary litigation risks weighing on Monte dei Paschi di Siena (MPS) and keep them in state hands, a source close to the matter said. The spin-off is a necessary step for the Treasury to meet terms agreed with UniCredit as Italy’s no.2 bank and the Rome government negotiate a potential purchase of MPS by Unicredit UniCredit said late on Thursday it had signed a termsheet with the Treasury detailing the conditions on which it could buy “selected parts” of the Tuscan lender. The conditions include protection from any actual and potential non-ordinary risks stemming from MPS’s pending lawsuits. Such risks would be spun off from the bank and be kept in the Treasury’s hands, said the source, asking not to be named because of the sensitivity of the matter. The spin-off scheme needs clearance from European Union competition authorities, which want any potential solution to comply with EU state aid laws. UniCredit also said it would not take on any of MPS’s impaired loans and would be allowed to offload MPS’s performing loans that appear risky. Reuters reported on Thursday that state-owned bad loan manager AMCO would take on MPS’s problem loans. The European Commission did not immediately respond to a request for comment. Reporting by Giuseppe Fonte in Rome, editing by Gavin Jones and Louise Heavens Our Standards: The Thomson Reuters Trust Principles.