## Beyond the Dikes: Flood Scenarios for Financial Stability Risk Analysis

_IMF Working Papers, September 13, 2024_

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**Canonical URL:** [Beyond the Dikes: Flood Scenarios for Financial Stability Risk Analysis](https://www.imf.org/en/publications/wp/issues/2024/09/13/beyond-the-dikes-flood-scenarios-for-financial-stability-risk-analysis-554830)

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## Bibliographic details
- Authors: Caterina Lepore, Junghwan Mok
- Published: September 13, 2024
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400289545.001

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### 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

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- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2024/09/13/beyond-the-dikes-flood-scenarios-for-financial-stability-risk-analysis-554830_