Taking guidelines from how badly Ireland's banks were hit in its financial crisis, economists at the global banking institute said they expect the losses to be in the range of between €216 and €260bn.
"A number of factors suggest that the losses could be nearer the upper end of this range. Spain's macroeconomic prospects are worse than those faced by Ireland, especially as regards growth and unemployment," it said in a new review of the global economy.
"The bulk of the losses would be generated by the commercial real estate loan portfolio, which is concentrated in the cajas," the Spanish savings and loan banks, it said.
The IIF is an association of around 450 banks around the world and has been closely involved in the eurozone crisis, leading the negotiations for a write-down of Greece's private-sector debt in March.
The IIF said the banks were able through the end of last year to find enough capital internally to put aside €110bn for loan loss reserves, and some will be able to keep generating capital internally to meet needs. But not all of them.