Slovenia has funds to recapitalize banks: central bank

By Almir Demirovic

LJUBLJANA (Reuters) - Slovenia's government has the funds available to recapitalize its ailing banks "very quickly", the central bank said on Tuesday, indicating that it had discussed the results of stress tests due to be announced this week.

The results are expected to be published on Thursday and will determine whether Slovenia can fix its banking sector alone or become the latest member of the 17-nation euro zone to seek a bailout from the European Union and International Monetary Fund.

In a statement suggesting the results were already in, the central bank said its Council had discussed them and assured Slovenians that banks would continue to operate normally once they are announced.

It noted passage of a bill giving the government the green light to inject up to 4.7 billion euros ($6.45 billion).

"The appropriate legal basis for their recapitalization has been prepared and the government has the funds for that purpose, so the recapitalization will be implemented very quickly," the bank said in the statement.

It assured Slovenians that banks would continue to "operate normally" once the results are announced.

Slovenia's banks are nursing an estimated 7.9 billion euros in bad loans that piled up through two recessions since the onset of the global crisis in 2008 crippled the country's vital export sector. The crisis has exposed a system of crony capitalism in which the state controls around 50 percent of the economy.

Officials and analysts say they expect the stress tests to reveal a hole of between 4 and 5 billion euros that the government will have to plug.

The government is expected to draw on some 3.6 billion euros of its own cash deposits and burn junior bondholders to the tune of some 500 million euros.

It may also tap markets, though the government said last week it may not need to having last month placed a three-year, 1.5 billion euro bond with a sole mystery buyer.

($1 = 0.7289 euros)

(Writing by Matt Robinson; Editing by Susan Fenton)