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Here comes the flood: the climate risk of residential mortgages in Rimini

Author

Listed:
  • Ivan Faiella

    (Bank of Italy)

  • Luciano Lavecchia

    (Bank of Italy)

Abstract

This paper seeks to assess the expected reduction of the residual debt for the purchase of properties included in the mortgage portfolio of some banking intermediaries operating in an area particularly exposed to the risk of coastal flooding (Rimini) by evaluating different scenarios, including the implementation of an adaptation intervention (the Parco del Mare). For these analyses, we cross-referenced the data on bank assets from a sample of banks with the data on expected damages (distinguished by scenario and return periods) elaborated by researchers at the Centro Euro-Mediterraneo sui Cambiamenti Climatici Foundation (CMCC). The estimated losses, in relation to the value of the properties by census section, were applied to the mortgage portfolio of the banks participating in the project. The results show that the coastal barrier significantly reduces the losses in the mortgage portfolio, highlighting a significant heterogeneity of the impact among the intermediaries involved. It is also emerges that the banking system needs to improve the quality of the information required to identify the assets exposed to such risk and to assess their vulnerability should the event materialize.

Suggested Citation

  • Ivan Faiella & Luciano Lavecchia, 2025. "Here comes the flood: the climate risk of residential mortgages in Rimini," Questioni di Economia e Finanza (Occasional Papers) 925, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_925_25
    as

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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2025-0925/QEF_925_25.pdf
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    References listed on IDEAS

    as
    1. Dylan E. McNamara & Martin D. Smith & Zachary Williams & Sathya Gopalakrishnan & Craig E. Landry, 2024. "Policy and market forces delay real estate price declines on the US coast," Nature Communications, Nature, vol. 15(1), pages 1-16, December.
    2. Giorgio Meucci & Francesca Rinaldi, 2022. "Bank exposure to climate-related physical risk In Italy: an assessment based on AnaCredit data on loans to non-financial corporations," Questioni di Economia e Finanza (Occasional Papers) 706, Bank of Italy, Economic Research and International Relations Area.
    3. Ivan Faiella & Filippo Natoli, 2018. "Natural catastrophes and bank lending: the case of flood risk in Italy," Questioni di Economia e Finanza (Occasional Papers) 457, Bank of Italy, Economic Research and International Relations Area.
    4. Giacomo Bressan & Anja Đuranović & Irene Monasterolo & Stefano Battiston, 2024. "Asset-level assessment of climate physical risk matters for adaptation finance," Nature Communications, Nature, vol. 15(1), pages 1-13, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    climate change; coastal flooding; mortgages; data gap;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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