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Polish household default risk and physical risk of climate change

Author

Listed:
  • Kurowski Łukasz

    (1 Warsaw School of Economics)

  • Sokal Katarzyna

    (2 Warsaw School of Economics)

Abstract

This paper aims to assess the level of credit risk (from the perspective of default risk) among Polish households associated with the physical risks of climate change. In order to determine the potential impact of the physical risk of climate change on household credit risk, we conducted CAWI interviews with 1,006 borrowers residing in different Polish voivodeships (to account for heterogeneity of credit exposures to extreme weather events). According to these respondents, wildfires and storms in Poland are the greatest source of physical risk of climate change. In the event of a wildfire or storm, approximately 13% of borrowers would not be able to repay their loans while not being insured, which potentially increases banks’ credit risk and exposes banks to losses. However, we find that households underestimate the credit risk that could arise from a drought.

Suggested Citation

  • Kurowski Łukasz & Sokal Katarzyna, 2023. "Polish household default risk and physical risk of climate change," Financial Internet Quarterly (formerly e-Finanse), Sciendo, vol. 19(3), pages 87-99, September.
    • Handle: RePEc:vrs:finiqu:v:19:y:2023:i:3:p:87-99:n:3
    DOI: 10.2478/fiqf-2023-0021
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    More about this item

    Keywords

    Physical Risk; Credit Risk; Household Debt; Extreme Weather;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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