Ibercaja, a mid-sized lender based in Spain, has announced that it had agreed on a deal to acquire smaller bank Caja 3, representing the latest merger activity that have shrunk the banking system in the country from more than 40 banks to today's 15.

Ibercaja was among the few Spanish lenders that did not need to look for public aid in 2012 to respond to losses following the burst of property bubble in the country.

The smaller bank was aided with 407 million euros, or 524 million dollars, in European funds as part of a bailout of the Spanish financial sector amounting to 41 billion euros.

Ibercaja released a statement disclosing that the three former savings banks that formed Caja 3 are set to own 12.5 percent of the bank capital.

Spanish financial sector has experienced deep pain as more and more banking companies were forced to close due to bankruptcies and rising costs.