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By Marja Novak
LJUBLJANA, April 16 Slovenia's banks are expected to pass this year's European Union-wide stress tests, Bank of Slovenia vice-governor Stanislava Zadravec Caprirolo told a banking conference on Wednesday.
The central European country narrowly avoided an international bailout in December by pumping 3.3 billion euros ($4.6 billion) into its mostly state-owned banks, but Zadravec said the economic forecast on which the stress tests will be based have improved since external tests were conducted last year in line with EU demands.
"The results (of the EU stress tests) should confirm that step (bank overhaul) was completed successfully," the central bank official said.
The European stress tests will be made in three state-owned Slovenian banks - Nova Ljubljanska Banka (NLB), Nova KBM (NKBM) and the state export and development bank SID Banka.
Last year's tests revealed that Slovenian banks would need 4.8 billion euros of extra capital in an adverse scenario. Since then, however, most banks have been recapitalised and most bad loans of the three largest lenders - NLB, NKBM and Abanka Vipa - are being transferred to the state-owned bad bank.
The Bank of Slovenia last week said it expected the country's economy to expand by 0.6 percent this year after two years of recession, boosted by a rise of exports. That was a significant improvement on its forecast in October for a 0.7 percent decline this year.
Slovenia is also planning a bank privatisation programme to boost budget income and improve management in a sector that has piled up a large amount of bad debt through reckless lending.
Finance Minister Uros Cufer said on Wednesday that the government plans to sell the country's second-largest bank NKMB by the end of this year. ($1 = 0.7234 Euros) (Editing by David Goodman)