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  • Interbank Exposures: an Empirical Examination of Credit Risk Spillover Effect Between Financial Institutions in Russian Federation from 2000 to 2017

Student
Title
Supervisor
Faculty
Educational Programme
Final Grade
Year of Graduation
Marina Kalinina
Interbank Exposures: an Empirical Examination of Credit Risk Spillover Effect Between Financial Institutions in Russian Federation from 2000 to 2017
Financial Analyst
(Master’s programme)
2019
Stability of financial systems has always been of interest to researchers, though for different reasons over the years. With multiple financial crises over the last few decades, many research studies are dedicated to the analysis of the interbank lending market as a substantial distribution channel for financial distress. In particular, current changes to the Russian banking system and the Central bank policies aimed to stabilize the banking system affect the financial sector.

This paper is an attempt at examining the evolution and principal factors of contagion risk between the actors of Russian banking system for the period from 2000 to 2017. To conduct the analysis, we used the information on Russian interbank lending market and bank financial statements. The goal of this research is to assess the changes in the level of credit risk spillover as a factor of systemic risk minimization.

The hypothesis of our research could be formulated as follows: the structure of the interbank market influenced by the policy of the Central bank of Russia and other factors shifted from nearly complete structure to connected money center structure, nevertheless the level of contagion in the financial system decreased comparing to the previous periods.

The results of this research show that the policy of Central Bank influenced positively on the overall level of net worth of financial system, whish as a result decreased the contagion level. Nevertheless, the structure of financial system changed from complete structure to money center structure with the increase in the total interbank market size and level of concentration. These factors seem to increase the contagion level. Besides, through the given period, we observe that 2 money centers represent not disconnected structure start interacting with each other, thus limiting the spillover effect.

Key words: Financial system stability, contagion in the financial sector, network analysis, interbank market.

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