The key risk - a caja meltdown - seems more remote

The Bank of Spain is expected to show on Thursday which banks need to raise funds to meet government targets, part of measures to inject credibility into the financial system brought low by a property bust.

Market attention is likely to focus on Bankia, the newly christened merger of seven lenders led by Caja Madrid, which is Spain's biggest savings bank by asset value.

Bankia had a capital ratio of 7 percent at the end of last year, falling short of the minimum target for listed banks.

Spain's Socialist government has estimated the banking system has a funding shortfall of 20 billion euros ($28 billion), while analysts' estimates rise to as much as 100 billion euros.

The cost of borrowing for Spain rose late last year on fears its banking system would need bailing out like Ireland's due to huge loans to property developers, many of whom went bust after the real estate bubble burst.

Measures taken by the government to force savings banks, known as cajas, to seek private capital have calmed those fears, and funding costs for the sovereign have shrunk since the beginning of the year.

"The key risk - a caja meltdown - seems more remote," said Goldman Sachs in a recent research note.