Three Spanish savings banks - Ibercaja, Liberbank and Caja3 - have approved a merger to strengthen their weakened balance sheets.
The merged bank would create the country's seventh biggest lender, with 120 billion euros ($US151 billion) in assets.
After the merger, Ibercaja will account for 46.5% of the new bank, while Liberbank will have 45.5% and Caja3 will get 8%.
Caja3 is already the result of a three-way merger of regional savings banks. Liberbank emerged after a four-way merger.
And Bankia, a debt-stricken part-nationalised bank that has requested a bail-out worth 19 billion euro from the government, was formed after seven banks merged.
Another bank, Banco Popular, announced on Tuesday that it was in talks to sell its online banking business in an effort to raise cash. Its debt has been downgraded to junk-bond status.
The government has asked banks to set aside nearly 84 billion euros to cover bad debts.
The difference between German and Spanish bond yields also hit a new high, as investors lose faith in the Spanish economy and flee to safety.
German 10-year bond yields fell to 1.347% while Spain's rose to 6.5%.
Spanish shares were also lower, with the IBEX share index in Madrid down 1.7% in afternoon trading despite other European indexes rising.
Investors are worried about the amount of bad loans Spanish banks could be holding and how the government can afford to keep bailing out the struggling financial sector.
The Bank of Spain has predicted that the recession will continue in the second quarter of 2012.
Retail sales down
Retail sales dived in April, showing the biggest fall since the figures started being collected in 2003.
Sales fell 9.8% last month compared with the same month last year, after adjusting for calendar differences.
The fall was much worse than had been expected, and marked the 22nd consecutive month of declining sales. Sales had fallen by 3.8% in March.
Retail sales fell 11.3% in April having dropped 4% in March.