Crowds jeered as Rato arrived at a courthouse outside Madrid on Monday to defend allegations that  he and his colleagues spent 12 million euros ($13.5 million) of the bank's funds on extravagant personal expenses.

Protesters shouted "thief" and "fraud," in reference to accusations that the former International Monetary Fund chief misused funds at lenders Caja Madrid and Bankia.

The case surrounds the use of so-called black credit cards by senior executives including Rato to pay for luxury personal items, without ever justifying them or declaring them to tax authorities.

The cards were used between 2003 and 2013 to pay for jewels, holidays and expensive clothes, according to documents filed with the court, but also to fund more mundane trips to the cinema.

In some cases the bank executives splashed out at the height of Spain's devastating economic crisis.

Rato allegedly spent 99k

According to the indictment, Rato maintained the card system established by his predecessor Miguel Blesa when he took up the role at Caja Madrid in 2010.

He allegedly replicated the expense accounts when Bankia was formed out of the merger of seven savings banks including Caja Madrid in 2011. The company nearly collapsed at the height of the eurozone debt crisis, and thousands of small-scale investors who had supported the bank's flotation lost their money. The lender was bailed out by the state in 2012, just as Spain's entire economy teetered on the brink.

Prosecutors are seeking a four-and-a-half year prison sentence for Rato. He could also face a 2.6-million-euro fine if found guilty.

Money returned

Rato, who was once Spain's economy minister and deputy prime minister, has denied wrongdoing. He has said that the credit cards were part of the executives' pay deal, and he has paid back what he spent.

The case is a major embarrassment for Spain's ruling People's Party, whose government Rato served in for several years.  The party has been embroiled in several corruption scandals since it assumed power in 2011.

The party has repeatedly failed to form a new government this year following two inconclusive elections, due to falling popularity.

mm/kms (AFP, AP, Reuters)