Building A Modern Financial System provides penetrating insights into the recent upheavals in Indonesia, and explains the kinds of policies that can lead to the development of a modern financial system in a large, relatively underdeveloped country. The study covers all facets of the financial system, emphasising the role of the monetary authorities, the transition from government-dominated to a predominantly private banking system, and the recent rapid expansion of the capital market. Indonesia is a particularly interesting case because its economy and financial system was in shambles in the mid-1960s owing to political adventurism and economic mismanagement. Until recently sensible economic policies and growth-promoting reforms provided a sound financial system and a balanced expansion of agriculture and industry. However since the mid-1990’s the stability of the Indonesian system has once again been called into question.