Introduction

Ten years ago, when the transition process in Central and Eastern Europe started, almost nowhere were the differences between the systems and the East–West divide manifested more starkly than in the financial sector. Whereas in market economies the financial sector plays a key role in the coordination of economic activities, central banks and stateowned commercial banks in Central and Eastern Europe had been merely responsible for passively accommodating and monitoring the payment flows between enterprises, as dictated by the central planners. In no way was the financial system actively involved in allocating resources to maximise the efficiency of their use. The task facing the transition economies was thus ‘to create a functioning financial system where none had existed before’ (EBRD 1998, p. 92).