Beyond the Dikes: Flood Scenarios for Financial Stability Risk Analysis
IMF Working Papers, September 13, 2024
Source details
- Canonical URL
- Beyond the Dikes: Flood Scenarios for Financial Stability Risk Analysis
Other formats
Bibliographic details
- Authors: Caterina Lepore, Junghwan Mok
- Published: September 13, 2024
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400289545.001
Study scope and methodology
- Assesses financial stability risks from floods in the Netherlands using a comprehensive set of flood scenarios.
- Flood scenarios vary by: geographical regions, flood types, climate conditions, return periods, and adaptation.
- Estimated damage from each flood scenario is used to calibrate the corresponding macro-financial scenario for bank stress tests.
Key findings
- The impact of floods on bank capital varies significantly by scenario, demonstrating the importance of considering heterogeneous factors in physical climate risk stress tests.
- Climate change amplifies the adverse impact on banks’ capital.
- Stronger flood defenses in the Netherlands can help mitigate some impacts.
- There is a non-linear relationship between flood damages and banks’ capital depletion, highlighting the importance of considering extreme scenarios.
Subject areas and keywords
- Subject: Climate change, Commercial banks, Environment, Financial institutions, Financial sector policy and analysis, Housing prices, Natural disasters, Prices, Stress testing
- Keywords: bank capital, banking stress test, Climate change, climate risk analysis, climate risk stress tests, Commercial banks, flood scenario, Global, Housing prices, Natural disasters, Physical risk, Stress testing
Content in this bundle
- Working Paper