Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/334952 
Year of Publication: 
2025
Series/Report no.: 
JRC Working Papers in Economics and Finance No. 2025/6
Publisher: 
European Commission, Ispra
Abstract: 
This paper assesses the impact of floods on credit to European small and medium-sized enterprises (SMEs) using a discrete-time survival model. We find a statistically significant relationship between the default probability of loans to SMEs and floods occurring in the region where the firm is located. We propose a micro-level stress testing exercise to assess the performance of small business loans under different climate scenarios. This approach enables the identification of European regions that exhibit heightened vulnerability under adverse climate scenarios. It also allows financial institutions and regulators to quantify the increase in default probability for each loan.
Subjects: 
climate change
loan default
natural disasters
risk modelling
stress testing
JEL: 
C55
G21
Q51
Q54
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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