Moody's on Wednesday downgraded NLB's deposit ratings by three notches to B2, from Ba2, while NKBM's and Abanka's were cut by four notches to B3, from Ba2 for NKBM and to Caa1, from Ba3 for Abanka.

The banks' standalone credit assessment was also downgraded to caa1, from b2 for NLB; to caa1, from b1 for NKBM and to caa2, from b2.

The latest downgrade on the three majority state-owned banks comes after an earlier one in late April when Moody's found the banks' capital bases to be very weak and insufficient to absorb any sizeable losses in 2012.

This time Moody's analysts reiterate their view that the rated Slovenian banks have limited capacity to address challenges on the standalone basis and expect all three banks to require additional capital injections.

Moody's has taken into account the recapitalisation of NLB and announced recapitalisation of Abanka, to be completed by the end of October, assessing that these provided only "temporary relief" and that "the amounts raised do not provide these two banks with a sustainable financial position to absorb future losses".

The capital position of NKBM, the second largest bank, also deteriorated in the first half of 2012. Although the bank announced its intention to address this deterioration by disposal of non-core assets, Moody's considers that "replenishing capital via asset sales remains challenging in the current market".

Moody's finds that the Slovenian banks remain the weakest capitalised banks in the Central and East European region (Czech Republic, Poland, Slovakia, Romania, Hungary and Slovenia).

The amount of bad loans remains very high and Moody's notes that the Slovenian government would likely provide capital funds to these loss-making banks only as a last resort, considering it faces fiscal challenges of its own.

Although the government recently recapitalised NLB, raising the bank's capital buffer just above the minimum level specified by the European Banking Authority, Moody's notes that this occurred only after the bank had explored all other viable options.