The proportion of bad loans on Spanish banks' books has reached a record of 11.7% as more companies and individuals defaulted amid the recession.
Figures from the central bank today show non-performing loans totaled €176.4 billion in June, up from €170.21 billion in May.
The ratio has soared from 1% in 2007, a year before Spain's property market collapsed, ushering in a crisis.
Spain has been in recession for most of the past four years and has a 26.3% unemployment rate.
The government claims its austerity measures and reforms are working and predicts the recession will end this year, but international experts are less optimistic. Spain was forced to ask for a €100 billion bailout for its banks last year.