MILAN (Reuters) - UniCredit, Italy's second-biggest bank, has received European Central Bank authorisation for its 14 billion euro all-share offer to buy smaller rival Banco BPM.

UniCredit's offer for BPM is one of several hostile bids rocking Italian banking, which underwent a painful clean-up after the 2008-2012 crisis years but has recently enjoyed record profits due to high interest rates.

UniCredit said that its board would approve on Sunday the share issue to fund the bid, which its shareholders authorised on Friday.

Italian market regulator Consob is expected to clear the offer document in the coming week, the final step before UniCredit can launch a tender.

However, the bank is likely to wait a month or so before doing that, a person familiar with the process said.

UniCredit CEO Andrea Orcel, a veteran dealmaker who has also built stakes in Germany's Commerzbank and Italian insurer Generali, has repeatedly said he won't endanger shareholder returns to pursue a tie-up.

UniCredit bid for Banco BPM in November, weeks after its rival moved to buy fund manager Anima Holding.

The 1.8 billion euro Anima acquisition became more costly for BPM this week after the ECB issued a negative view on the possibility of BPM tapping favourable capital rules known as a 'Danish Compromise'.

BPM had secured prior shareholder approval to pursue the Anima deal even without the benefits, which would have allowed it to pay out an extra 1 billion euros in dividends, and on Thursday said it would press ahead regardless.

UniCredit has the right to drop its bid for BPM without the Danish Compromise benefits, and it reiterated that it would closely monitor the effects on BPM's profitability and capital levels in deciding what to do.

On Friday it said the Anima setback showed it had been right in offering a near zero premium to BPM's shareholders.

(Reporting by Valentina Za; Editing by Kirsten Donovan)