Explaining Rent-seeking Through Legal Channels (Legislation for the Banking System) Using Political Economy Approach

Emerging and expanding of rent seeking behavior due to distributing the value eliminating rents can have destructive consequences for economic growth, especially for a country like Iran which has bank based financing and also has economic activities in agricultural and industrial areas that need special protection. One of the channels for generating and keeping these rents in political economy field and also in the close relations of economic and political areas is legislation. Inefficient capturing of legislation prevents its main function serving public interest. In this study, after reviewing the theories about political economy of legislation in banking system, we investigate legislation and supervision of the banking system laws in Iran for 2005-2015 based on World Bank questionnaire and using library and interviewing method in three areas of legal activities, monitoring the shareholders and quality of central bank supervision. Findings show that weak legislation, enforcement and supervision due to weak performance guarantee and also existence of administrative soft law are the main current challenges.