## 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

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### 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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_Source: https://www.imf.org/en/publications/cr/issues/2022/06/02/philippines-financial-sector-assessment-program-technical-note-on-bank-stress-test-for-518566_