* Experts question whether 4.8 bln euros was too much
* CFO of Slovenia's largest bank says its plans won't change
* Central bank head hopes sales will end past habits
By Laura Noonan
LJUBLJANA, Dec 16 (Reuters) - The sighs of relief around Europe when Slovenia said it could rescue its banks without an international bailout have been matched by anger from locals who see it as an over-generous deal that will discourage financiers from changing their ways.
The rescue announced last week will give the former Yugoslav republic's three largest banks capital ratios of 15 percent, well above the European Union average of about 10 percent, they note.
The cost of cleaning up Slovenia's state-owned banks, whose loans to the politically well-connected belied the country's image as a post-communist success story, came in at four times the government's 1.2 billion euros prediction.
The 4.8 billion euro bill, which Slovenia said it could meet, was arrived at after a lengthy review of its eight biggest banks by auditors Ernst & Young and Deloitte, plus stress tests from consultants Oliver Wyman and Roland Berger.
The central bank hopes it will speed privatisation, which it sees as the only way to make a break with the past.
Saso Stanovnik, chief economist at Ljubljana-based Alta, said the review was too aggressive, testing the banks against a 3.8 percent fall in GDP in 2014, more than twice as high as European Union estimates, and a 2.9 percent drop for 2015, when the EU expects slight growth.
"Therefore three big banks will now be more than efficiently capitalised. As for the negative effect this can lead to in terms of possible delay of non core divestment and other measures that need to be implemented - but are now not that critical - yes, that risk definitely is present," he said.
Asked whether he thought the banks needed that much money, Central Bank Governor Bostjan Jazbec said Slovenia was following guidelines from the European Commission and European Central Bank, which wanted cover for potential losses to 2015.
Jazbec is hoping foreign investors will sort out the corporate governance problems in state-owned institutions that saw them notch up 9.5 billion euros of bad loans - about 20 percent of their total loan books.
To get EU state aid approval for the rescue, Slovenia will sell all of its second largest lender Nova KBM and third largest player Abanka, along with at least 75 percent of the biggest player NLB.
"There are three kinds of banking - Anglo-Saxon, Islamic and Slovenian," Jazbec said in an interview on Friday.
"Hopefully the Slovenian part of the differences will be resolved by foreign banks, hoping to increase their market share by further consolidations, by mergers and investments."
Both Jazbec and external analysts including Deutsche Bank economist Peter Sidirov have stressed that Slovenia is not out of the woods yet and Jazbec said the worst-case growth scenario in the review was not inconceivable.
An investment banker active in the country, who asked not to be named as his firm's work is sensitive, said he believed buyers would be found.
"There are not that many number one or number two banks that are being sold (in any market)," he said. "Market share is important." Slovenia's state owned banks have a collective market share of about 60 percent.
France's Societe Generale, which has a small presence in the country, is not considering an investment, a source familiar with the bank's position told Reuters. Other foreign banks in the area include Italy's UniCredit and Austria's Raiffeisen, but a brand new player could also come in.
Full details of the results of the review have not yet been released, but Jazbec said about two thirds of the money going into Slovenia's largest banks was to cover current positions and a third potential future losses.
The other element of the recapitalisation deal, transfers to a bad bank and losses imposed on junior bondholders, were also to cover possible losses down the line, he said.
With more of its banking system in state ownership than any other country in the EU, politically-motivated lending was endemic, with big losses from funding management buyouts and other privatisations of state-owned enterprises.
Banks also lost heavily by lending to companies who speculated on shares and investments.
The rescue is drawing sharp criticism from Slovenian people who earn an average of just 1,500 euros a month and have seen their economy shrink by 11 percent since 2008.
They fear giving the banks more than they need could prompt them to ease efforts to sell assets like supermarkets and newspapers and allow them to defer restructuring.
"We put too much in banks," said Robert Cankar, a 36-year-old designer. "If so far we haven't managed to fix this problem, let it all come down and we'll do something else."
Nurse Marizela Nuhanovic, 27, agreed. "It's wasted money, she said. "Government should be investing in its citizens."
One source familiar with the review told Reuters the level of Non Performing Loans in some asset categories was more than double what banks had admitted and pointed to systematic under-reporting.
"Mostly, banks just don't want to recognise NPLs," said a second source familiar with the review, who also questioned the results of the test.
"The number is bigger than expected and they (the authorities) don't believe it's right," said the source, referring to the resulting general capital ratios.
An EU official stressed that all decisions on the bank review were taken by a steering committee which included members of the Bank of Slovenia and the Slovenian Finance Ministry, as well as the independent consultants and representatives from the European Banking Authority, European Central Bank and European Commission.
The review involved more than 200 professionals, often burning the midnight oil at lead-consultants Oliver Wyman's makeshift battle room in the banqueting hall at the Slon Hotel opposite the central bank or working late onsite at the banks.
Oliver Wyman have consistently refused to comment on any aspect of the stress test work.
Archibald Kremser, chief financial officer of the largest bank NLB, which will get 1.9 billion euros of extra capital after the review, said the figures were in line with their own internal assessments.
NLB and Nova KBM have already filed restructuring plans with the EU's state aid division, while Abanka's is still a work in progress.
"If that's the allegation, that it would make us more complacent, then this is certainly not true for us," Kremser said. NLB's restructuring plan anticipated recapitalisation, he said, and would not change "one millimetre" in light of it.