UPDATE 2-Slovenia moves to liquidate two small banks, provides guarantees
* To liquidate two banks
* Provides guarantees of
(Adds details of guarantees of 1.3 billion euros)
LJUBLJANA, Sept 6 (Reuters) - Slovenia - struggling to avoid an economic bailout - will liquidate two small banks, Factor Banka and Probanka, to ensure the financial stability of its banking system, the country's officials said on Friday.
A statement by the finance ministry and the central bank said the government had provided guarantees totalling 490 million euros ($645 million) for Probanka and 540 million for Factor Banka, to ensure the repayment of their depositors.
Local banks, struggling with 7.5 billion euros of bad loans or more than one-fifth of national output, are at the heart of speculation that Slovenia may follow other troubled euro zone members and seek an international bailout in the coming months.
Central bank governor Bostjan Jazbec, who also sits on the European Central Bank's governing board, said depositors and companies that have savings in the two banks will not lose their savings as the state guarantees all savings in the two banks.
He said depositors would be able to withdraw money as they did before, "with no extra limitations" and there was "no basis for a run on the two banks" -- the first lenders to crumble since Slovenia's economy went downhill in 2009.
"What we are doing is designed to increase security of the bank deposits and improve stability of the banking system," Jazbec told an evening news conference.
Finance minister Uros Cufer said the action was approved by the European Commission.
The two banks are privately owned and are among the smallest lenders in the country of two million people.
Jazbec said earlier on Friday that "further activity of the two banks could significantly reduce financial stability in the Slovenian banking system".
"The Bank of Slovenia and the government are trying to prevent a similar scenario as in Cyprus and representatives of international institutions are ready to prevent that scenario," he said.
All banks in Slovenia are closed on Saturday and Sunday.
Slovenia was the fastest growing euro zone member in 2007 but was badly hit by the global crisis due to its dependency on exports.
It has been struggling with a new recession since last year amid lower export demand, credit crunch and a fall of domestic spending caused by budget cuts. ($1 = 0.7600 euros)
(Reporting By Marja Novak; writing by Zoran Radosavljevic; editing by Ron Askew)