Much to the displeasure of the Bank of Spain, the sector has been engaging in a deposit war now for several months in order to improve liquidity after the debt crisis in the euro zone cut off traditional wholesale funding sources for many lenders.

Some banks are offering annual deposit rates of 4 percent, thereby, narrowing their margins and restricting their ability to lend. The practice also ends up increasing the borrowing costs of households and companies.

The decree move follows repeated calls by the central bank to put an end to what it feels is a self-defeating practice.