Beiträge zur Jahrestagung des Vereins für Socialpolitik 2017: Alternative Geld- und Finanzarchitekturen - Session: Banking III D15-V2
We document that natural disasters significantly weaken the stability of banks with business activities in affected regions. This is reflected, among others, in higher probabilities of default and foreclosure ratios. The effects are economically relevant and suggest that insurance payments and public aid programs do not sufficiently protect bank borrowers against financial difficulties. We also find that the adverse effects dissolve after some years if no further disasters occur in the meantime.