Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/229131
Authors: 
Pagliari, Maria Sole
Year of Publication: 
2021
Series/Report no.: 
ECB Working Paper No. 2517
Abstract: 
This paper proposes an approach to estimate the impact of adverse climatic events on the profitability of small European banks (LSIs). By considering river ooding phenomena, we construct a unique database matching the information on location, frequency and severity of oods with the location and balance sheet data of institutions mainly operating in the areas where they are headquartered (territorial LSIs). We compare the performance of territorial LSIs across regions at low and high ooding risk and test for the \core lending channel" hypothesis, whereby lending to the real economy is a catalyst of physical risks. Results show that an adverse event dropping loans to households and non-financial corporations by one percentage point (pp) of total assets entails a decrease in the Return on Assets (ROA) of territorial LSIs in riskier areas by 0.01pps (~3.1%). Moreover, if all territorial LSIs were located in riskier areas, one bank out of two would report an average ROA between 0.0001 and 0.52 percentage points lower than what observed.
Subjects: 
Climate change
LSIs
Protability
Dynamic panel regressions
Core Lending
JEL: 
C33
G21
Q54
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-4517-2
Document Type: 
Working Paper

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