An Italian judge has rejected a prosecutors' request to seize just under 200 million euros ($275 million) of funds from JP Morgan as part of an investigation into Banca Monte dei Paschi di Siena's acquisition of a smaller rival, a source with direct knowledge of the matter said.

Prosecutors allege that JP Morgan withheld information from Italian regulators about a 1 billion-euro ($1.4 billion) financing the New York-based bank arranged for Monte Paschi's takeover of regional lender Antonveneta in 2008.

The source did not say why the prosecutors had requested the asset seizure.

A spokewoman for JP Morgan in Italy said the bank, which has denied any wrongdoing, had no immediate comment to make on Wednesday.

A judge will decide on March 6 whether to indict JP Morgan together with seven individuals, including Monte dei Paschi's former chairman and director general, for allegedly obstructing regulators.

($1=0.7262 euros)

(Reporting by Silvia Ognibene; Writing by Silvia Aloisi; Editing by Greg Mahlich)