European Commission staff, in liaison with staff from the European Central Bank, visited Madrid on 7-8 May for the eleventh post-programme mission to Spain. Staff from the European Stability Mechanism participated in the meetings in the context of its Early Warning System. Since the Commission has just released its 2019 Spring Economic Forecast and is now assessing Spain’s fiscal situation as part of the European Semester process, the mission focused exclusively on financial sector developments. It discussed the overall performance of the banking sector and credit developments over the past two quarters, with a focus on solvency, liquidity position and profitability, as well as the evolution of non-performing loans. The asset management company SAREB updated the mission on the progress of its divestment activity. The mission also examined recent initiatives to strengthen Spain’s prudential framework. It met Spain’s new macro-prudential authority – AMCESFI - and discussed the new competences of Bank of Spain to tackle potential imbalances within sectors, including with borrower-based tools and sector-specific exposure limits. The full surveillance report will be published in early July 2019.