The consequences of risk taking and competition of banks in attracting deposits in the conditions of information asymmetry; Case Study of the Banking System of Iran

One of the most important aspects of financial deregulation is the freedom to compete in interest rates. The experiences of banking crises around the world have shown that, in most cases, high interest rates on deposits Not only does not prove the banking effectivity, but also points to Ponzi's gameplay in the banking system. The process is like this: the banks lend to risky clients and then the loan will be defaulted. As a result, banks are forced to attract deposits and repay debts. This trend has emerged in the banking system of Iran and in particular in recent years. The question is that in the competition for the attraction of deposits, what is the relativity between interest rates offered by the high-risk Bank and Low-Risk Bank. This question was answered through modeling the behavior of banks and loan applicants in the form of a two-stage game in the context of information asymmetry and by postulating some feature of banking system of Iran. The result shows that the interest rate offered by the high-risk bank is higher than the interest rate risk of the low risk bank. so, unhealthy banks have a significant role in directing interest rates.