ROME (Reuters) - Investigating magistrates in Italy on Tuesday froze millions of euros worth of assets belonging to a prominent Italian banker they believe used the Vatican bank and another Holy See financial department for market manipulation.

The financial crimes police said in a statement that they had executed the magistrates' orders, sequestering 2.5 million euros ($2.64 million) in buildings, stocks and land belonging to Giampietro Nattino, head of Banca Finnat Euramerica SpA. [BFE.MI]

Magistrates accuse him of market manipulation and providing false information to Consob, Italy's stock regulator.

Nattino said in a statement that the frozen assets belonged to him personally and not to his bank, and that he would cooperate with investigators.

Shares in his private bank fell 3.6 percent before recovering some of that loss.

Tuesday's developments followed an exclusive report by Reuters in November, 2015 about a Vatican investigation into Nattino's accounts at the Vatican bank, known as the Institute for Works of Religion, and at APSA, an office that oversees Vatican real estate and investments. http://reut.rs/2m7SvYh

A confidential document seen by Reuters at the time covered the period from 2000 to 2011 and was passed on to Italian and Swiss investigators for their checks because some activity tied to the accounts allegedly took place in these countries.

Vatican investigators suspected that on one occasion when his bank handled a stock placement, the APSA accounts were used to buy shares before they were allocated to other investors.

In their statement on Tuesday, police said Nattino had used the "cover" of the Vatican financial institutions to carry out "a complex stock operation which resulted in criminal behavior regarding market manipulation".

The police statement said Nattino had employed "misleading and false" methods to "substantially alter" the price of shares in his bank.

It said Italian magistrates were investigating two people who were managers at APSA in 2011 on suspicion of complicity. The Vatican had no immediate comment on the Italian magistrates' order or on who the former Vatican officials were.

Nattino's statement on Tuesday referred back to one issued in 2015 in which he said his work had "always been characterized by maximum transparency and correctness".

The Vatican, a sovereign state surrounded by Rome, has enacted a number of provisions to cleanse its finances and make them more transparent in recent years, particularly since the election of Pope Francis in 2013.

Among the reforms was the closing of accounts held by outsiders such as Nattino.

APSA made headlines in June 2013 with the arrest of Monsignor Nunzio Scarano, who worked there for 22 years as a senior accountant.

Last year he was acquitted of charges of conspiracy to smuggle 20 million euros in cash into Italy from Switzerland to help friends avoid taxes.

Scarano, who still faces a separate trial on money laundering charges, denies all wrongdoing.