An analysis of the banking system indicates that in recent years, the imbalance situation in some banks has worsened, such that, according to statistics published by the Central Bank, a significant portion of the increase in the monetary base, liquidity, and inflation has resulted from this intensification of imbalances in banks, and the continuation of the current situation is highly dangerous. A review of the banking literature shows that banks worldwide, alongside attracting public deposits, also engage in money creation, and these attracted or created resources are provided as loans to the private sector. The private sector, in turn, utilizes the resources obtained from banks for investment and enterprise operations. However, in Iran’s economy, the banking system, under a uniform monetary and banking framework, performs two different roles: that of a bank and that of an investment company. Weaknesses in the country’s monetary and banking laws—particularly Article 8 of the Law on Usury-Free Banking—have allowed banks to directly engage in investment. In other words, in Iran, the two entities of investment companies and banks have been merged. Exploiting this institutional (legal) weakness and the legal authority they possess to invest directly, banks have engaged in money creation and deposit mobilization, subsequently investing in various sectors and engaging in enterprise operations. Given that banks lack sufficient expertise in enterprise operations, first, they have invested public deposits in projects that have ultimately led to deadlock and resource freeze. Second, due to conflicts of interest, banks have viewed the private sector as a competitor and consequently have not extended the necessary loans to finance this sector. Therefore, the challenge of the banking system in Iran’s economy stems from the fact that the banking system’s structure was fundamentally formed in a defective manner and requires STRUCTURAL and institutional REFORMs and the adoption of tough decisions to return to the correct path. The present article seeks, based on historical-institutional analysis, content analysis, and pathology of the national banking system’s structure, to design and explain an evolutionary transition model from the current situation to the desired state, and to develop the architecture and STRUCTURAL REFORM of the banking system to reduce imbalance and strengthen the financing capacity of the private sector.