Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/336495 
Year of Publication: 
2026
Series/Report no.: 
Sveriges Riksbank Working Paper Series No. 460
Publisher: 
Sveriges Riksbank, Stockholm
Abstract: 
Physical climate risks significantly influence banks' collateral practices. Drawing on comprehensive loan-level data from Sweden, we find that adverse weather events increase both the likelihood and the amount of collateral required for new loans. For existing loans, banks are less inclined to reappraise collateral following weather shocks; when reappraisals occur, collateral values are typically revised downward. Our analysis also highlights the mitigating role of geographic proximity between borrowers and lenders. Overall, our results indicate that while banks limit potential losses from physical climate risks by tightening collateral requirements, this practice may eventually exacerbate firms' financial constraints.
Subjects: 
bank lending
collateral
climate risk
JEL: 
G21
G32
Document Type: 
Working Paper

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