Since the establishment of the state and until 1985, Israel’s capital market was mostly nationalized. The government controlled most of the financial activities, and the scarce private activity was shared by only a few institutions that lacked real competition. A long line of reforms that took place since 1985 and to this day revolutionized the banking structure, the capital market and the pension system: • The government reduced its involvement almost completely • The funding means of the business sector and of households expanded tremendously • International capital movements were liberalaized • Conflicts of interests were reduced and the competition amongst financial institutions was improved. The book is divided into 3 parts: The demand for investment in means of production and housing; the funding supply of these investments; and the financial institutions and their supervising system. Every chapter covers a description of a different aspect of the Israeli capital market before exploring the market failures that plagued it and the reforms that alleviated them. A special emphasis is dedicated to the importance of resisting the pressure of interest groups and to the lessons that need to be implemented in the tasks that still lay ahead.