Spain's banks had 155.84bn Euros of loans on their books in May that are at risk of not being repaid, the highest since 1994.
The figure for doubtful loans is 8.95% of total lending extended by Spanish banks, the Bank of Spain said. Much of the potential bad loans relate to the bursting of Spain's property bubble and descent into recession.
The figure underlines the weakness of many Spanish banks, which in 2008 had doubtful loans of 3.37% of all lending.
Last month, Euro zone countries agreed to provide up to 100bn Euros to support Spanish banks and put risky loans into a bad bank. Further details of the arrangements will be discussed at a Euro zone finance ministers meeting on Friday.
In May, Bankia had to be bailed out by the Madrid government.
As the Spanish economy contracts, unemployment rate is the highest in Europe at 24%, and property prices have been falling at an annual rate of more than 10%.
In a report published by the IMF, it was estimated that the Euro may be over-valued by 10% to 15% than is healthy for the Spanish economy.
In Italy, the Euro adjustment needed to stay competitive was between 5% and 10%, and for stronger Euro zone nations it was between 0% and 5%.
Despite major policy actions, financial markets in parts of the Euro zone remain under acute stress, raising questions about the viability of the monetary union itself, the IMF Economic Health Check.