The Effect of the Banking Business Model on Financial Stability of Banks in Iran

Document Type : Original Article


1 Assistant professor, Department of Economics, Qaemshahr Branch, Islamic Azad University, Qaemshahr, Iran

2 Ph.D, Department of Economics, Economic consultant of Shahr Bank, Tehran, Iran.


This study investigates the effect of the business model on financial stability of banks operating in Iran. For this purpose, based on the economic approach of the banking business model, two financing structures (ratio of non-deposit financing to total liabilities) and income structure (ratio of non-interest income to total operating income) are used to measure the business model. Next, the impact of these measures and other explanatory variables on the stability of banks (standard deviation of asset returns) was estimated by a multivariate regression model using random effects model and the panel data of 22 banks (17 private banks and 5 state banks) for the period 2010-2016. The results show that an increase in the ratio of non-interest income raises the bank stability index. Therefore, the more banks rely on non-interest income, the more stable they will operate in terms of profitability.