A MODEL FOR RESTRUCTURING THE IRANIAN BANKING SYSTEM

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MIRJALILI S.H.

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Journal Paper

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Journal: NAMEH-YE-MOFID Year:2004 | Volume:10 | Issue:2 (42 ECONOMICS) Page(s): 65-92

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Title

A MODEL FOR RESTRUCTURING THE IRANIAN BANKING SYSTEM

Author(s)

MIRJALILI S.H. | Issue Writer Certificate

Keywords

BANKING SYSTEMQ4

FINANCIAL INTERMEDIATIONQ4

MONETARY SECTOR CAPITAL SECTORQ4

Abstract

The current set up of Iranian BANKING SYSTEM is the continuation of previous structure and nothing has changed in the banking organization after the passage and implementation of law of interest free banking operations. The changes introduced in the arrangements of banks after the enactment of the Law, were confined to the nationalization and merger of these banks. While non-interest banking operation is essentially different from interest based BANKING SYSTEM, the lack of an appropriate structure has caused Iran's BANKING SYSTEM to remain far from an interest free and efficient system. The low share of banks direct investment, noncontingent return, the incompatibility of intermediation with principle-agent method, lack of commitment to the nature of contracts, inverse selection, and moral hazards are the major implications of Iranian BANKING SYSTEM remaining unchanged. The research aims at presenting a model for restructuring the Iranian BANKING SYSTEM- in conformity with interest free financial system. To keep the intermediatory nature of bank, its dual legal entity, and monetary and capital sectors, as it is the case in conventional banking operations, Iranian banks' should only act as financial intermediators and hand over the investment and agent tasks to appropriate institutions. Thus, the current BANKING SYSTEM must undergo three changes. First, bank operations should be limited to handling current accounts, beneficiary loan deposits and other common banking services. Secondly, banks should not accept time investment deposits, this task will be handed over gradually to the related institutions. Thirdly, specialized banks should be transformed into commercial investment banks. In this model, the interest will be eliminated and the specialization of financial institutes will help decrease the informational asymmetry. As a result, direct investment will increase and the economic growth will accelerate.

Cites

CONCENTRATION INDEX OF CREDITS IN ISLAMIC CONTRACTS AND EVALUATION OF THEIR IMPACT ON ECONOMIC GROWTH IN IRAN

References

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APA: Copy

MIRJALILI, S.H.. (2004). A MODEL FOR RESTRUCTURING THE IRANIAN BANKING SYSTEM. NAMEH-YE-MOFID, 10(2 (42 ECONOMICS)), 65-92. SID. https://sid.ir/paper/3710/en

Vancouver: Copy

MIRJALILI S.H.. A MODEL FOR RESTRUCTURING THE IRANIAN BANKING SYSTEM. NAMEH-YE-MOFID[Internet]. 2004;10(2 (42 ECONOMICS)):65-92. Available from: https://sid.ir/paper/3710/en

IEEE: Copy

S.H. MIRJALILI, “A MODEL FOR RESTRUCTURING THE IRANIAN BANKING SYSTEM,” NAMEH-YE-MOFID, vol. 10, no. 2 (42 ECONOMICS), pp. 65–92, 2004, [Online]. Available: https://sid.ir/paper/3710/en

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