Rato is one of 66 accused in a scandal that allegedly saw executives and board members at Caja Madrid and Bankia - the group whose near-collapse sparked an EU bailout of Spain's financial sector - spend around €12 million ($13 million) on themselves between 2003 and 2012.
They are accused of criminal conversion, or the wrongful possession or disposition of another's property as if it were one's own.
On Thursday, prosecutors at the Audiencia Nacional, Spain's top criminal court, asked for a six-year jail sentence for Miguel Blesa who headed up regional savings bank Caja Madrid until 2010 and is accused of starting the practice of giving out credit cards for personal use.
In Spain, prosecutors announce the jail terms they want for suspects after the probe ends and before the trial starts.
They are also seeking four-and-a-half years for Rato who succeeded him and allegedly continued the practice, even when he became board chairman of Bankia, which was formed in 2010 through the merger of seven regional savings banks including Caja Madrid.
Rato, once a member of Spain's incumbent conservative Popular Party and a former finance minister, was also head of the International Monetary Fund from 2004 to 2007, which played a leading role in tackling the eurozone's financial crisis.
Prosecutors said Thursday they were also seeking €9.3 million in compensation from Blesa and €2.7 million from Rato - amounts allegedly spent on credit cards when they were in charge.
Media reports last year said that the executives and board members spent the money on items such as safaris, meals at luxury restaurants, art, clothing as well as massive cash withdrawals.
When questioned in court in 2014, however, Rato denied any wrongdoing and said the credit cards were for discretionary spending as part of the pay deal for executives in Caja Madrid.