This paper analyzes a number of issues related to the development of financial markets in the previously centrally planned economies (PCPEs) of Eastern Europe.1 These economies have embarked on major structural reforms to replace central planning with market mechanisms, both in the allocation of factors of production and in the production and distribution of goods and services. In most cases, they are implementing these reforms together with stabilization policies to deal with severe macroeconomic disequilibria. It is widely acknowledged that the success of the stabilization policies and the structural reforms depends in an important way on the development of efficient financial intermediaries and of credit and capital markets more generally.