An Interest Rate Commission Agent Banking System

Abstract

The financial crises emanating from bank run, bad debt, asset-liability mismatch, excessive leverage, sovereign default that result in bank failure have not been solved. In order to solve these problems, banks adopted several models even though each banking business model was a catalyst for financial crisis. However, these problems can be solved by applying an interest rate commission agent banking system (AIRCABS), which is a system where the bank is an agent for investors’ loan funding to entrepreneurs by setting up an agreement between the fund seller, and buyer and administering the loan after disbursement. The bank then retains a reasonable commission from the agreed investor’s loan funding contract. As interest rates increase, the demand for funding loan to entrepreneur through AIRCABS also increases.

Keywords: financial crises, bank run, investor loan funding, discrete interest rate, interest rate commission agent banking, liquidity problem, banking model

JEL Classification: E22, E40, E50, G01, G33