Investigating the effect of stability in the banking industry on the efficiency of the banking system of the Iranian economy

Document Type : Original Article

Authors

1 PhD student in Economics

2 Assistant Professor, Faculty Member, Azad University, South Tehran

3 Assistant Professor at Department of Economic and Accounting, Tehran Jonoub Branch, Azad Islamic University

4 Faculty member of South Tehran University

Abstract

The present study was conducted to examine the effect of banking stability on banking system efficiency in Iran's economy by using the Markov switching econometric model during 1984 - 2019. Results indicated a decline in foreign exchange earnings resulting from negative oil shocks to Iran's economy, which led to lower banking system efficiency of the Iranian economy due to exchange rate volatility and higher credit risk. Finally, some issues have led to the revenue instability of Iranian banks. The issues are as follows: high risk of banking activity (credit risk) and its impact on other financial and monetary sectors, high cost and complexity of the lending process, high cost of loans and low funding sources, bad debts, and failure to achieve goals of facilities, disrupted monetary and banking systems, low banking system efficiency, lack of optimal allocation of financial sources to essential sectors, violation of depositors' rights, mistrust of economic agents in monetary and banking system, no trust in future, violation of banks' rights by influential persons, and prevention of financial resources entering to production sector of the economy. Instability problems will be solved if the issues mentioned above are solved.

Keywords

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Economic Strategy
Volume 10, Issue 39 - Serial Number 39
February 2022
Pages 657-726

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