Abstract: This study aims to offer a systematic model to measure the banks competitive ability. This study introduces a model which helps the banks to understand their current status in order to do future planning. The model presented in this study, gives main variables affecting banks competitiveness including financial power, market share, human capital, international-exchange activities and the use of technology. Each of these variables can be calculated through their indices. After being approved by experts, this model is confirmed by using factor analysis and Lisrel software. The results show that among model variables, financial power has the most powerful effect on competitiveness of Iranian banks. Next, this model has been used to rank competitive ability of state-run (commercial and professional) and private banks using the TOPSIS technique.