UPDATE 1-Slovenian central bank says stress tests will be expanded to cover 10 local banks
* Results due by year-end, later than previously expected
* Analysts say time running out to overhaul banks
* Bad loans at 7.5 bln euros (Adds details, quotes, background)
By Marja Novak
LJUBLJANA, Aug 19 (Reuters) - External stress tests on Slovenia's banks will be expanded to include 10 lenders and the results should be released by the end of the year, the central bank said, indicating a further delay in the overhaul of the troubled banking sector.
The European Commission has requested stress tests on Slovenia's banks, which need to clean up bad loans that are threatening to force Slovenia to follow some other euro zone members and seek an international bailout.
Finance Ministry officials had previously indicated that only the three biggest of 18 banks operating in the country would face stress tests and that the results would be available this summer.
Local banks are struggling under 7.5 billion euros ($10 billion) of non-performing loans which equals about 21.5 percent of GDP.
On Monday the central bank said tests would be done on the three top banks, state-controlled Nova Ljubljanska Banka, Nova KBM and Abanka Vipa, as well as for the local units of Italy's Unicredit Bank, Austria's Hypo Alpe Adria Banka and Raiffeisen Bank and several smaller local lenders.
"The exercise aims to assess the potential capital needs ... for a three-year projection period (2013-2015)," the central bank said in a statement.
It said the Oliver Wyman company would do the stress tests while Deloitte and Ernest&Young would perform the asset-quality review. So far Slovenian authorities have confirmed that the process was already under way in the largest bank NLB.
In July, the government said the first transfers of bad loans to a 'bad bank' formed earlier this year could be expected by the end of September. They were initially planned in June but the European Commission said it would only approve the transfers after external stress tests of the banks were completed.
"First transfers of bad loans will probably not be completed by the end of the third quarter but more likely by the end of the year," said Saso Stanovnik, chief economist of investment firm Alta Invest.
"Slovenia still has some room to sort out the problems of its banks without a bailout but time is running out," he said.
Slovenia was the fastest growing euro zone member in 2007 but was badly hit by the global crisis due to its dependency on exports and its failure to enact major market reforms since gaining independence in 1991.
Over the past decades it refused to sell its main banks, insurers and energy firms so the government controls about half of the economy, and analysts say corruption and cronyism are problems. ($1 = 0.7500 euros) (Editing by Zoran Radosavljevic and Susan Fenton)
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