The entrance of Monte Dei Paschi di Siena is seen in San Gusme near Siena, Italy, September 29, 2016. REUTERS/Stefano Rellandini

MILAN (Reuters) - Monte dei Paschi di Siena BMPS.MI said on Sunday it had been forced to end early a 10-year bad loan management contract so that it could have more freedom in selling off bad debts in a worsening economic environment.

Monte dei Paschi had closed a year ago the sale of its bad loan management unit, dubbed Juliet, to asset manager Quaestio Holding and credit manager Cerved CERV.MI, signing a 10-year contract under which it paid fees for debt collection services.

The bank said in a statement on Sunday it would pay 40 million euros as an early-termination penalty for ending the contract and then work with Juliet to pick loans to sell for up to 3 billion euros.

“The revision of the accords is aimed at the reduction of risk parameters in the context of a significant worsening of economic conditions in recent months,” it said.

Monte dei Paschi said the penalty was fully offset by lower debt servicing fees in the years ahead.