An important literature is growing on financial reforms in the countries in transition: it is widely understood that putting in place well designed financial systems is a crucial element of structural reforms. The Central and East European Countries (CEEC) are painfully leaving behind the caricature of a Modigliani-Miller world: in the absence of capital market the performance of enteprises was determined by real variables, financial flows being adjusted to real flows. The lack of a full fledged financial system has often been identified as one of the main weaknesses of centrally planned economies.