Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/283106 
Year of Publication: 
2023
Series/Report no.: 
JRC Working Papers in Economics and Finance No. 2023/14
Publisher: 
European Commission, Ispra
Abstract: 
We document that European banks charge higher interest rates on loans granted to small and medium-sized firms located in areas at high risk of flooding. At 6 basis points, the average risk premium does not adequately reflect the deterioration of loan performance in the aftermath of flood episodes, however. Firms in flooded counties are more likely to default on their loans than non-disaster firms. Floods reduce securitised credit in the local markets, suggesting that physical risks associated with climate change are borne within the banking sector.
Subjects: 
climate change
loan default
loan pricing
natural disasters
JEL: 
C55
G21
Q51
Q54
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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