A group of international investors has called on the Spanish government to reconsider plans to cut costly subsidies for solar power, saying they would cause a wave of defaults and more bad loans for Europe's banks.

Tom Murley, head of the renewable-energy team at U.K. private-equity firm HgCapital, said the changes represented a "breach of trust" that would increase regulatory uncertainty in the Spanish renewables industry.

"If they proceed on this path, they'll endanger not only our investment, but the whole sector," said Mr. Murley, who represents a group of 20 pension-fund managers and strategic investors in the Spanish solar-photovoltaic, or PV, industry.

The Spanish government is expected to adopt a proposal in the next few days that will cut solar-PV subsidies by as much as 30%—including for existing power plants, according to industry officials.