The likely loss will range from 10 percent to around 50 percent, a level which Reuters reported last week.

Many junior debt holders, who rank behind other creditors in Spain's state-rescued lenders, are customers who entrusted their life savings to the banks, making any loss they suffer as part of the bailout a hot political issue.

State-owned banks are negotiating with the European Union to receive funds from a 100 billion euro ($127 billion) cedit line as part of an international bailout.

The EU will rule on the banks' proposals on Nov. 28.

"A deal has been clinched on swapping these (debt)instruments with Bankia shares and the discount applied will depend on the instruments," the source said on condition of anonymity.

The source said subordinated debt with fixed maturities is set to lose 10 to 20 percent of its face value while a discount of 40 to 50 percent will be applied on perpetual subordinated debt and preference shares.

The source warned that last-minute talks could still change these figures.

Bankia, which sought a 23.5 billion euro bailout from the state in May, declined to comment.

Some 22.5 billion euros of preference shares were held by Spanish bank customers in May 2011. That has dropped to 5.5 billion euros since most listed banks swapped them for shares or bonds to comply with a 2011 global regulation that preference shares no longer count as bank capital.

The stock market regulator estimates retail customers account for almost all of the 5.5 billion euros in preference shares in circulation.

Bankia has 3.1 billion euros in preference shares held by retail investors, and just 0.1 billion euros held by institutional investors.

It has 1.9 billion euros in subordinated debt held by retail investors and 1.3 billion euros by institutional investors.