MADRID (Reuters) - Spain is planning to force its regional savings banks to become conventional banks and seek stock market listings, a source familiar with the matter told Reuters.

The state-backed bank restructuring fund (FROB) would then take stakes in the banks which fail to attract private investment, the source said.

The debt-laden savings banks and a possibly expensive rescue are seen as major risks for Spain's government as it aggressively cuts its budget deficit.

The Bank of Spain and the government are at odds over whether a change in law is required to speed the reform of Spain's regional banks, separating their financial businesses and social activities, El Pais newspaper reported.

The government will announce a change in law to speed their reform before the end of the month, the paper said, citing sources close to the Bank of Spain.

Spain hopes the regional banks can raise private capital, reducing their need for a capital injection from the government. The cajas could need 40-50 billion euros (34-42 billion pounds) more capital to plug losses from soaring property debts, Evolution Securities said in a recent note.

(Reporting by Manuel Maria Ruiz, Writing by Sonya Dowsett, editing by Mike Peacock)