Is teaching interest based banking system in school allowed for a Muslim teacher?
Why not? Before judging if Haram or Halal one has to understand what is interest and how financial institutions use it. In my experience it is better to wait for students to be at least 15 years old.
Yes, the banking system is Haram. If you read history, you will understand that all market krach were caused by the actions of banks. In 2008 and 2009 the financial markets had a krach because the banks sold bad investments to investors telling them that these investments were good and safe. They lied, that is haram. They stole money from millions of innocent people when they cheated, that is also haram.
But the original question was not about banking or interest based banking system, the question was about teaching the banking system.
One cannot love without knowledge. Why is interest considered haram? If you love your children, teach them, show them why interest is Haram and why Allah tells us, with love, that we should not deal with people who use interest to profit by lying and changing the balance they use in the markets.
It is not appropriate to talk about these things when a child is too young. I did teach my children about interest and Haram but only when they were old enough to understand the reason behind. I showed them because I love them I did not want their faith in Allah to be blind. Now my children can accept and love the very words of wisdom that Allah gave us about interest.