INTERCONNECTEDNESS AND SYSTEMIC RISK AMONG LISTED RUSSIAN FINANCIAL INSTITUTIONS

Abstract

This paper investigates the structure and dynamics of interconnectedness and systemic risk in the Russian financial system, considering both banks and non- bank financial institutions, based on data for listed Russian financial institutions spanning the pre- and post- 2022 sanctions periods. Our contribution to the existing literature is twofold. First, unlike studies focused predominantly on the banking sector or cross- border spillovers, we examine the within- country topology of interconnectedness across the full spectrum of listed institutions, covering stock exchange, insurance, asset management, leasing, microfinance, and diversified holding categories. Second, we integrate a comprehensive network- econometric framework combining TVPVAR connectedness, the Network Volatility Index with its volatility and contagion decomposition, ΔCoVaR and Marginal Expected Shortfall, and local projection impulse response analysis to study the bi- directional feedback between systemic risk and network topology. Our results demonstrate that the Russian financial system is a concentrated network in which a small core of dominant institutions, including Sberbank, VTB Bank, and Moscow Exchange, generates the majority of system- wide spillovers, while other institutions function predominantly as absorbers. The post- 2022 sanctions regime has intensified rather than fragmented internal interdependencies, and the persistent dominance of contagion over volatility effects indicates a strong internal transmission mechanism. Besides, we find asymmetric feedback whereby systemic risk shocks reshape network topology more persistently than the reverse, with Sberbank and VTB Bank strengthening their net- emitter status after 2022. Our findings emphasize the need for macroprudential policy in Russia to target network architecture rather than individual institutions' volatility.