Inefficiency and instability in Iran's banking system are rooted in the long-term, disproportionate growth of monetary variables relative to production growth; over the past five decades, the monetary base and liquidity have expanded at exceptionally high rates, establishing a strong correlation between money growth and inflation. A major portion of monetary base growth stems from the increase in the central bank's net foreign assets, largely related to the conversion of government oil revenues into rials, reflecting the central bank's limited control over its own balance sheet. Alongside this factor, government and bank fiscal dominance, the lack of de jure and de facto institutional independence of the central bank, and multi-objective mandates have undermined monetary policy efficacy. Furthermore, poor legislation and excessive reliance on bylaws and directives have distanced implementation from the spirit of the law, creating regulatory loopholes and perpetuating a cycle of incomplete reforms. Other structural issues include monopoly and the concentration of power within a few large banks, generating anti-competitive incentives that restrict the growth of private banks and banking system reform. Proposed strategies emphasize central bank independence from the executive branch, explicit prioritization of price stability as the primary objective, enhanced transparency and accountability, precise definition of the central bank's legal identity and relations with the government, banks, and society, the strengthening of regulatory and supervisory positioning, and the drafting of rigorous laws with minimal dependence on bylaws.