This paper discusses the characteristics of Croatian financial system in the terms of his bank-based orientation, respectively dominant position of banks as financial institutions. Since the creation of Croatian financial system in the nineties, same as in many other transition countries, banks have become the basis of functioning of entire system and therefore the sustainability of their business is an important task of the regulatory institutions. A strong bank-based orientation of Croatian financial system, within this paper, is demonstrated using a number of studies and indicators of economic theorists and the world's relevant institutions. A strong bank-based orientation led to neglecting alternative forms of investment and financing, neglect of financial markets and the relatively underdeveloped non-banking institutions. Within such a system, banks and bank products are the main forms of investment and financing, which is relatively unfavorable for the functioning of the economy, especially capital-demanding projects. Through the work there are described two school examples of bank-based and market-based financial system, respectively the financial system of Germany and USA. At the end there is also a description of risk sensitivity of financial system that exist in Republic of Croatia as well as the perspective of his future development.