Fears that Europe's debt crisis is morphing from Greece to engulf bigger economies such as Spain and Italy have sent Asian stock markets lower.
Spain's banking system is under strain a week after Bankia, its fourth-largest bank, required 23.8 billion US dollars (£15.3 billion) in government aid to cover souring real estate loans.
Investors are increasingly worried that problems might surface at other Spanish banks. Many lent heavily during the nation's real estate bubble and losses from the real estate crash might be too big for Spain's government to shoulder.
Another negative signal came from the European Central Bank, which said Spaniards pulled billions in deposits out of their banks last month, raising concerns of a larger bank run.
On Wednesday, borrowing rates rose sharply for Spain and Italy, a sign that investors are increasingly uneasy about their ability to pay off their debt.
Japan's Nikkei 225 index tumbled 1.9%, also hit by a stronger yen which erodes the profits of the country's exporters. Mazda Motor Corp. plunged 5.8%and Canon Inc fell 4.4%.
Hong Kong's Hang Seng lost 1.4% to 18,423.61 and South Korea's Kospi was down 1.3% at 1,821.32. Australia's S&P/ASX 200 shed 1.1% to 4,051. Benchmarks in Singapore, Taiwan, mainland China, Indonesia and the Philippines also fell.
Energy shares fell on lower oil prices. Hong Kong-listed Sinopec, Asia's biggest oil refiner, fell 1.8%. China National Offshore Oil Corp, or CNOOC, lost 2.7%.
The Dow Jones industrial average closed down 1.3% on Wednesday at 12,419.86. The Standard & Poor's 500 index lost 19.10 points to 1,313.32.
The Nasdaq composite index fell 33.63 to 2,837.36. Rising demand for safe investments pushed the yield on the benchmark 10-year Treasury note down to 1.61%, apparently the lowest since the Second World War.