Madrid, Jun 11 (DPA): Spanish savings banks Caja Madrid and Bancaja Thursday announced that they were merging to create the country's biggest savings bank.

The boards of the two banks approved the merger. The new company will also include five smaller savings banks, with which Caja Madrid had agreed to join operations.

The merged entity was to have total assets of about 340 billion euros ($408 billion).

Caja Madrid Chairman Rodrigo Rato, a former head of the International Monetary Fund, was expected to chair the new entity, which will allow the participating banks to retain their brands and legal structures.

Caja Madrid is currently Spain's second-largest savings bank, after La Caixa, while Valencia-based Bancaja ranks fourth.

Spanish savings banks have speeded up merger plans in order to be able to get financial support from the bank restructuring fund FROB. About a half of the country's 45 savings banks are carrying out or discussing mergers.

Meanwhile, Banco Sabadell and Banco Guipuzcoano were negotiating what could become the first merger among middle-level banks during the current banking restructuration process, sources close to the talks said. There was no official confirmation from either bank.

International analysts have urged Spain to restructure its banking sector as part of attempts to revive its sluggish economy.