Climate change and banking stability
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Date
2025-09-16
Authors
Κοσκινιώτου, Σωτηρία
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Abstract
Climate change has implications and risks for both economic stability and people's lives. It mainly affects the banking sector through the exposure of the most affected countries to loan repayment difficulties. In this analysis, we used panel data from banks in 38 countries and 27 years from 1995 to 2021, studying the impact and correlation of natural hazards and disasters on the economy and banking stability through capital, loan repayments, and the concentration of large banks' assets and using fixed effects models and probit model as well as control variables to reduce robustness. Our analysis combines macroeconomic variables with environmental measurements that are affected by environmental risks. The results showed that environmental tools affect both bank volatility and markets due to the impact of natural disasters. Therefore, this analysis shows that more measures are needed to protect banks and the economies of countries through policies that will lead to a reduction in the impact of environmental risks.
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Keywords
Climate risk, Banking stability, CO2 emissions in production, GDP per capita purchasing power parity (PPP), Bank assets