MADRID: Spain's regional savings banks have long been a source of funding for social projects like libraries but this role is under threat from a new government requirement that all lenders raise their capital or face state intervention.

Many of the savings banks, known as cajas, were originally pawnshops started by Catholic charities. The clergy gradually ceded control of most of them to regional politicians, who were eager to use them to finance city projects.

The unlisted cajas, which account for around half of all lending in Spain, voluntarily dedicate about a quarter of their revenues to social works, said a spokeswoman for Caja Madrid, the country's oldest savings bank which was founded in 1838.

"The money is used to build libraries, care centres for Alzheimer's, employment training programmes, ambulances, cultural centres," she said.

In 2009, the last year for which figures are available, they spent 1.8 billion euros ($2.5 billion) on social projects which accounted for 33,600 direct and indirect jobs, according to the Spanish Confederation of Savings Banks.

But they are now under pressure to find private investors after the government announced last week that all Spanish lenders will have to have a core capital level of 8.0 percent by September.

Finance Minister Elena Salgado said the amount needed to recapitalise the country's banking system will not exceed 20 billion euros and "all or part" of that sum will come from financial markets.

The government will step in to take temporary stakes in those savings banks that do not meet the new requirements by then.

The measure is part of the government's efforts to strengthen the cajas, weakened by mounting write-offs related to the collapse of the real estate market, and fend off market fears that Spain may need an Irish-style financial rescue.

The arrival of private investors at the cajas "will lead to a dilution of their capital which will obviously affect how profits are shared and the amount of money that is dedicated to social projects because there will be more shareholders," the Caja Madrid spokeswoman said.

These social works are relics from a poor, rural and backwards country, in which the state had no resources, no capacity for social action," said Fernando Fernandez, an economist and professor at Madrid's IE Business School.

"In a modern economy it seems logical that the state do this work."