The aim of this paper is to analyze the relationship between market structure and performance in the Spanish banking during the period 1986-95, using a direct measure of efficiency. The results obtained allow us to reject the traditional colusion hypothesis given that there is no significant positive relationship between profitability and concentration. By constrast, the results obtained offer limited support for the efficient structure hypothesis since, although efficiency and market share (in the case of the commercial banks) have a positive effect on profitability, efficiency is not positively related to concentration or market power. The results obtained also show that market share is an inadequate proxy for efficiency.