Faeries need a way to encourage them to build less elites and build more wizards, thiefs, or offense, to prevent the niche of t/m=Faery=stack D=go for UB. -3 generals decreases their offensive power, which just pushes them back to "stack defense." Their offense really isn't anything special, too. Unless they're dedicating 20-30% of their land to attacking buildings, they'll be nothing but a couple extra hits on a chain target (mostly irrelevant).
Here are some suggestions:
Reduce WPA/TPA% mods (10-25% is still HUGE in the scheme of things; I'd kill for a 10% WPA mod as a Dwarf right now), they'll need to run more thieves and wizards to achieve the same numbers, which means less defense.
Add +%wages penalty. Wizards and thieves do not require wages. Stacking defense will become more expensive than building a rounded army. This will also effectively reduce their comfortable % draft rates.
Reduce losses when attacked (built in GS). Faeries are the only caster/thief that do not get any sort of space efficiency mod. They typically ignore hospitals and GS and go for UB, because it's ineffective to have balanced buildings (not enough space). Faeries won't be as heavily damaged by attacks, and won't be forced to stack defense to stay afloat.
