The Need for Change in Iranian Banking System Business Model

World economics has experienced transformational change since last three or four decades. Financialization of most developed economies is one of these changes. Thisphenomenon has disrupted the balance between real and financial parts of economies in favor of financial part. All of these changes, from deregulation and globalization to financialization have occurred step by step but continuously. Global banking system not only has found its position but also has moved along with such transformation.Two major features of financialization era are: 1- Replacement of originate and hold banking business model with originate and transfer/insurance and, 2-Securitization of structured finance products (Chares et al, 2011).These features wholly transformed nature and roles of banking and financial markets in modern economies. The Iranian banking system was not an exception and experienced an enormous transformation from commencement. Based on published reports, Iran Islamic banking assets contributed 42.7% of the total global Islamic banking assets in 2012, followed by PGCC (34.1%) and Malaysia (10.0%).However, one problem is still unsettled: There has been no change in banking business model and it still persists on traditional originate and hold model. Given this problem, the main purpose of this paper is to review the banking system business models and to provide an appropriate business model. Based on the review of literature, the study found the misalignment of interests among the key players of financial system as the main reason of the financial crisis. Therefore, it can be said that, inappropriate implementation of these innovations is the main reason.

Keywords:

Business Model , Financialization , Originate and Hold , Originate and Tran