Up to a point, banks and markets both foster economic growth. Beyond that limit, expanded bank lending or market-based financing no longer adds to real growth. But when it comes to moderating business cycle fluctuations, banks and markets differ considerably in their effects. In normal downturns, healthy banks help to cushion the shock but, when recessions have coincided with financial crises, we find that the impact on GDP has been three times as severe for bank-oriented economies as it has for market-oriented ones. Banks and markets channel savings into investment in quite different ways. Banks perform intermediation mostly on their balance sheets. They take in savings typically as deposits and provide funding primarily in the form of loans, often through close relationships with borrowers. Markets, by contrast, keep savers and investors at arm’s length, by serving as a forum where debt and equity securities are issued and traded. Banks can overcome problems arising from asymmetric information and contract enforcement using the knowledge they accumulate through relationships; markets do so by means of contract covenants and the courts. All financial systems combine bank-based and market-based intermediation. But financial structure the particular blend of the two intermediation channels – varies across countries. In this article, we discuss some of the determinants of financial structure, and how that structure might affect economic growth. The latter question is much debated. Some studies find that both financial intermediaries and markets are important for economic growth (Boyd and Smith (1998), Levine and Zervos (1998)). Others conclude that financial structure per se does not matter: it is the overall provision of financial services (banks and financial markets taken together) that is important for growth (Demirgüç-Kunt and Levine (1996), Levine (2002)). Another possibility is that the relationship is more complex and that the answer varies depending on a country’s level of economic and financial development (Demirgüç-Kunt et al (2011)).