Formulating the Banking System Transformation Document of Iran: A comprehensive roadmap for restructuring, transparency, and technological development of the banking system
Abstract
The national banking system, as the vital artery of liquidity flow, investment, and allocation of economic resources, has faced profound and growing challenges over recent decades. In response, this study presents the Banking System Transformation Document as a comprehensive roadmap for reform and restructuring of Iran’s banking sector.
This document is designed with the objective of enhancing efficiency, transparency, and accountability across banks, offering a holistic framework to address existing challenges while harnessing the opportunities of emerging financial technologies. The implementation of this transformation plan will pave the way for a banking system that is stronger, more efficient, and better aligned with the future needs of the country.
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Elaboration of Pillars and Strategies for the Transformation of the Banking System of the Islamic Republic of Iran
Pillar 1: Re-engineering Bank Balance Sheets
Focus on reducing idle assets, improving asset quality, ensuring sustainable cash flows, and enhancing risk management.
Pillar 2: Operational Independence from Corporate Ownership
Banks should withdraw from direct ownership of enterprises, return to core banking functions, and improve transparency and accountability.
Pillar 3: Adaptive, Multi-layered Regulation with Smart Supervision
Adopt data-driven, real-time oversight using technologies like machine learning to detect risks and violations quickly.
Pillar 4: Restoring Public Trust through Digital Transparency and Ethical Banking
Strengthen trust by transparent contracts, ethical practices, accountability, and customer-oriented reporting.
Pillar 5: Alternative Revenue Models via Advanced Financial Services
Diversify income beyond loans by expanding open banking, fintech collaboration, and digital financial services.
Pillar 6: Business Model Reconfiguration with Digital Transformation
Redefine banking around AI, automation, and digital platforms to modernize infrastructure and customer experience.
Pillar 7: Strengthening Banks’ Role in Liquidity and Macroeconomic Stability
Align banks with monetary policy, support financial stability, and manage liquidity to curb inflation.
Pillar 8: Rebuilding Human Capital with Technical and Ethical Competencies
Develop multi-skilled professionals with expertise in digital banking, ethics, and financial innovation.
Pillar 9: Early Warning Mechanisms for Hidden Insolvency
Use data analytics and predictive algorithms to detect financial distress and intervene preventively.
Pillar 10: Expanding Development Banking in Underserved Areas
Promote inclusive growth through microfinance, mobile branches, and participatory financial models.
This study was conducted at Maha Management Innovation Center by Hamidreaza Tafghadi in 2025.
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