Philippines: Financial Sector Assessment Program-Technical Note on Bank Stress Test for Climate Change Risks
IMF Staff Country Reports, June 7, 2022
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Bibliographic details
- Published: June 7, 2022
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400209215.002
Summary
- The Philippines is highly vulnerable to risks from climate change and natural disasters, especially typhoons.
- Depending on where a severe typhoon hits the Philippines, it could potentially cause a systemic impact.
- All major cities and most of the population reside on the coastline, including the metropolitan Manila area where about 60 percent of economic activities take place.
- Exposures to transition risk are concentrated in the coal-based power generation sector and the government’s licensing policy to build new power plants.
Key findings
- Geographic concentration of population and economic activity on the coastline increases vulnerability to physical climate shocks.
- Severe typhoons have the potential to generate systemic impacts on the financial sector, contingent on the location of landfall.
- Transition risks in the Philippines are primarily concentrated in:
- the coal-based power generation sector, and
- the government’s licensing policy to build new power plants.
Implications for banks and financial stability
- Bank solvency can be materially affected by large physical shocks (severe typhoons) that cause systemic economic disruption.
- Concentration of economic activity and population in coastal metropolitan areas (notably metropolitan Manila) amplifies potential credit and operational losses from natural disasters.
- Transition risk exposure tied to the coal power sector and policy decisions on new power plants may affect asset valuations and credit quality in sectors linked to energy.
Subjects and keywords (as reported)
- Subject: Climate change, Environment, Financial Sector Assessment Program, Financial sector policy and analysis, International organization, Monetary policy, Natural disasters, Stress testing
- Keywords: bank solvency STRESS TEST, Climate change, climate change risk, climate change STRESS TEST, Financial Sector Assessment Program, Global, IMF-World Bank Financial Sector Assessment Program, Macroprudential solvency stress tests, Natural disasters, Stress testing, WB staff
Philippines: Financial Sector Assessment Program-Technical Note on Bank Stress Test for Climate Change Risks
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