The Spanish Socialist Party (PSOE) has proposed a new plan to rescue Spain's faltering pensions system that it would fund via what would amount to an 8% corporation tax increase on banks.

PSOE leader Pedro Sánchez announced the €1 billion measure—which was swiftly rejected by the banking sector—in Madrid on Tuesday.

Mr. Sánchez would also like to see a financial transaction tax put in place, in order to collect another several hundred million euros in revenue.

Banking sources told Spanish media that they feared the "extraordinary" measure would be nothing of the sort and become mor...