The capital injection at the three banks will be carried out after approval from the European Commission, which is expected in the coming days, Finance Minister Uroš Čufer told the press in Ljubljana on Thursday.

Banka Slovenije Governor Boštjan Jazbec said that after the recapitalisation the core Tier 1 capital ratio of Slovenia's two biggest banks, NLB and NKBM, will stand at 15% and 16.8%, respectively, making them among the better capitalised banks in the eurozone.

NLB, NKBM and Abanka will be recapitalised with EUR 2.1bn in cash, mostly with the conversion of existing state deposits into equity, and EUR 905m stemming from recent bond issues.

Another EUR 441m will come from outstanding junior bonds, whose holders will lose their entire investments. Though the law making it possible to bail in bondholders is being challenged at the Constitutional Court, Čufer was confident it will pass muster.

NLB accounts for half of the total recapitalisation costs, EUR 1.55bn, with EUR 870m allocated for NKBM and EUR 591m for Abanka.

After approval from the European Commission the three banks will transfer their non-performing loans with a transaction value of EUR 1.6bn to the Bank Assets Management Company (BAMC), the bad bank, which will give it EUR 4.5bn-worth of assets.

The BACM received a EUR 200m capital injection today to allow it so start functioning. It will present the details of the asset transfer on Monday.

NLB and NKBM will start transferring their non-performing loans immediately, while Abanka needs to draw up a restructuring plan and submit it for approval to the European Commission, Jazbec explained.

It is expected that the transfer of assets will be largely completed in the first quarter of next year.

The remaining five banks which have been subject to EU-mandated testing - two Slovenian (Banka Celje and Gorenjska banka) and three foreign-owned (Unicredit, Raiffeisen in Hypo Alpe Adria) - will be asked by the central bank to buttress their capital base within six months. They need just over EUR 1bn, according to the stress tests.

Factor banka and Probanka, which are in the process of supervised liquidation and were only partially included in the stress tests, will be recapitalised with EUR 445m, explained Čufer.

The total capital shortfall of the eight banks is estimated at just under EUR 4.8bn according to the worst-case scenario applied in the stress tests.

After the operation, Slovenia's gross public debt will rise to EUR 75.6% of GDP, whereby the government will still have available EUR 2.5bn in cash for further measures, Čufer explained.

The measures are designed to ensure bank capital adequacy through 2015 under the worst-case scenario, which factors in potential losses in the next two years, Jazbec said.

The bailout plan involves the commitment that NLB and NKBM are privatised, with NKBM to be completely sold off by 2016 and NLB privatised until 2017, whereby the state plans to retain 25% plus one share in the bank.

Both Jazbec and Čufer were quick to point out that the bailout was merely the precondition for economic recovery.

This will be followed by measures such as corporate deleveraging, centralisation of the management of state capital assets under the Slovenia Sovereign Holding and further privatisation, Čufer said.

Initially, ten Slovenian banks were to be subjected to stress tests and asset quality review, but two small private banks, Factor banka and Probanka, were later excluded as they entered supervised liquidation on 6 September. Today, the government took a decision to supply them with EUR 445m in fresh capital.