Spain's third-largest savings bank, Banco Base, has become the first of the country's struggling financial institutions to seek government cash to bolster its ailing finances under new funding rules.

Spain's third-largest savings bank, Banco Base, has become the first of the country's struggling financial institutions to seek government cash to bolster its ailing finances under new funding rules.

The bank, formed out of four struggling local cajas, said it would need €2.8bn (£2.5bn) from the restructuring fund set up by the Bank of Spain.

The amount is nearly twice the capital shortfall the Bank of Spain had estimated for Banco Base, adding to the growing unease surrounding Spain's banks and their ability to cope with billions of pounds of bad loans during a prolonged recession.

A spokesman for Banco Base was not able to say why it was applying for more than the original estimate.

Plans to offer private investors a slice of the bank in an effort to raise capital were abandoned as part of the decision to seek state funds.

While Santander and BBV have passed current tests, 12 of Spain's other banks have been told to find an extra €17bn to shore up their finances and prevent a collapse in confidence.

Subsidiaries of Barclays and Deutsche Bank were among the 12 named as lacking capital, but all eyes were on the mutual cajas, which acted much like UK building societies until they became involved in a lending spree in the middle of the last decade.

Most were forced by the Bank of Spain to pool their resources by merging, but tests of their capital found they still needed extra funds.

The Basel III rules on banks' capital and another stress test this year in Europe have been putting pressure on banks to shore up capital to prevent a repeat of the funding crises that caused many lenders to seek government bailouts during the financial crisis.

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