Three of Spain's ailing regional banks are in talks about a possible merger, as the lenders struggle to cope with billions of euros in bad property debt.

Liberbank, Ibercaja and Caja 3, who together hold toxic real estate assets valued at around €11.8 billion ($14.8 billion), are at an advanced stage of merger negotiations, according to a source quoted by Reuters.

The merger talks come after Spain's second largest bank, Bankia, asked the government for €19 billion in bailout funds on Friday, fuelling speculation the country will soon have to approach international lenders for a much larger bailout amidst worsening finances and a sinking economy.

Ibercaja would hold a 46.5 percent stake in the new entity, with Liberbank at 45.5 percent and Caja 3 possessing the remaining 8 percent, the source added.

Losses at Spanish banks, which are rising in an economic downturn featuring 24.4 percent unemployment, are at the heart of worries that Spain could take the euro zone debt crisis into a dangerous new stage.

Spain's government, which is racing to reassure investors about the health of its banking system, had previously put the amount of state help needed to help lenders at €15 billion  - a figure now already surpassed by what Bankia alone will need.

Spanish banks have already written off €84 billion in real estate loans.

The latest merger news follows a wave of consolidations among regional lenders this year, as Madrid struggles to buttress its heavily indebted banking sector.

The number of banks has so far been reduced to 10, as the Spanish government maintains pressure on mid-sized banks to consolidate and declare the huge property-based losses.

Banks have until June 11 to demonstrate how they will meet capital demands and by June 30 they must have announced any merger plans.

The bank losses come as the country's regional authorities also struggle to repay bad debts and borrow from reluctant markets.

On Friday, Catalonia -- Spain's wealthiest autonomous region -- appealed to the country's central government for assistance.