In bank runs and market stress, it matters how networks impact: Exploring the financial connectedness in Vietnam

Anh T.H. Nguyen and Thanh T. Le

Finance Research Letters, 2025, vol. 72, issue C

Abstract: This paper explores the dynamics of financial connectedness in Vietnam and examines how interconnectedness among financial institutions – across banking, insurance, and securities sectors – affects the stability and resilience of the financial system. Using the network framework of Diebold and Yılmaz (2014), we present several key findings: first, we observe a consistently high level of interconnectedness among Vietnamese financial institutions, particularly in the aftermath of the Covid-19 pandemic and recent bank runs and market stress. Second, significant interconnectedness is evident between the banking and securities industries. Our analysis reveals that while banks have traditionally served as primary shock transmitters, securities companies have increasingly influenced systemic risk in the post-2020 environment. In contrast, insurance firms appear relatively isolated, primarily acting as net receivers of shocks from other sectors. These findings remain robust across various estimation windows and forecast horizons. This insight emphasizes the need for coordination among regulatory authorities responsible for different sectors. Regulators must address contagion risks by implementing macroprudential measures to ensure that financial entities across all sectors can withstand market pressures during challenging times.

Keywords: Financial connectedness; Networks; Financial institutions; Financial contagions (search for similar items in EconPapers)
JEL-codes: G11 G20 G28 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:72:y:2025:i:c:s1544612324015186

DOI: 10.1016/j.frl.2024.106489

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