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In Modules/_sqlite/connection.c, _pysqlite_final_callback() calls the finalize() method of the user function. Calling this method may clear the current exception, whereas test_sqlite excepts that exceptions of step() are reported.

New changeset a2214ab0812e by Victor Stinner in branch 'default':
Issue #18488: _pysqlite_final_callback() should not clear the exception set by
http://hg.python.org/cpython/rev/a2214ab0812e 

What is the expected behaviour? Should sqlite call finalize() if step() failed?
If finalize() must be called: which exception should be kept? step() or failure() exception?

I think both (PyException_SetContext), as in Python code. See textiowrapper_close() in Modules/_io/textio.c for example.

See also isue #18501, similar issue in ElementTree.
I created the issue while working on the issue #18408.

+1 for PyException_SetContext or similar. The C code should behave like a "finally: x.finalize()".

New changeset 020dbfdf9517 by Victor Stinner in branch 'default':
Issue #18488: Fix _pysqlite_final_callback()
http://hg.python.org/cpython/rev/020dbfdf9517 

"+1 for PyException_SetContext or similar. The C code should behave like a "finally: x.finalize()"."
If the Python callback failed in _pysqlite_step_callback() or _pysqlite_final_callback(): the exception is printed if sqlite3.enable_callback_tracebacks() has been called, or cleared otherwise.
Only one kind of exception is expected to be passed to be caller (according to sqlite unit tests): AttributeError. The changeset 020dbfdf9517 restores the behaviour of Python 3.3 for best backward compatibility.
If you want better reporting, please open a new issue.
My only concern was just to not call a Python function while an exception is set: I fixed this issue using PyErr_Fetch/PyErr_Restore. So I'm closing the issue.