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Wildfires and financial stability of U.S. regional banks in California

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  • Koch, Jascha-Alexander
  • Islam, Mohammad Saiful
  • Khan, Muhammad Sabir

Abstract

Wildfires represent one of the most visible and devastating consequences of climate change. Yet, their effects on the banking system are under-researched. This paper examines how wildfires – captured by the damage and destruction of structures – affect the financial stability of regional banks in California. Using a panel of 57 regional banks in California over fifteen years (2010–2024), we find that wildfires go together with lower financial stability of banks as measured by the Z-score. A rich set of bank-related and macroeconomic controls support the robustness of this finding.

Suggested Citation

  • Koch, Jascha-Alexander & Islam, Mohammad Saiful & Khan, Muhammad Sabir, 2026. "Wildfires and financial stability of U.S. regional banks in California," Finance Research Letters, Elsevier, vol. 101(C).
    • Handle: RePEc:eee:finlet:v:101:y:2026:i:c:s1544612326005301
    DOI: 10.1016/j.frl.2026.110001
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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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