Does heat stress deteriorate the quality of banks’ loan portfolios? Evidence from U.S. community banks

Vollmar, Steffen; Wening, Fabian


Zusammenfassung

Climate change affects the stability of the banking sector through physical risks and it poses a special threat to the performance of banks whose business is concentrated in the economy surrounding their headquarters. Among physical risks, heat stress stands out as the largest contributor to economic losses. We empirically examine non-performing loans from U.S. community banks between 2002 and 2021 and reveal a deterioration in the overall credit quality of institutions in heat-exposed regions. The results are relevant for banks and regulators, as they reveal exogenous locational disadvantages that could threaten exposed banks’ existence
in the near future.

Schlüsselwörter
Climate change, Physical risks, Bank loan quality



Publikationstyp
Forschungsartikel (Zeitschrift)

Begutachtet
Ja

Publikationsstatus
Veröffentlicht

Jahr
2024

Fachzeitschrift
Finance Research Letters

Band
69

Sprache
Englisch

ISSN
1544-6123

DOI

Gesamter Text