IDEAS home Printed from https://ideas.repec.org/p/cbi/stafin/5-si-26.html

Flood Risk, Interest Rates and Collateral Requirements: Evidence from Irish Firms

Author

Listed:
  • Carrol, James

    (Central Bank of Ireland)

  • Mahony, Michael

    (Central Bank of Ireland)

  • Morando, Bruno

    (Central Bank of Ireland)

  • O'Sullivan, Cormac

    (Central Bank of Ireland)

  • Shahabi Ahangarkolaee, Saeed

    (Central Bank of Ireland)

Abstract

We find that loans to borrowers in current flood risk areas (around 7 per cent of our sample) face an interest rate premium of roughly 7 to 13 basis points (which corresponds to a 3 per cent increase over the average interest rate charged in the sample) and are between 3 and 7 percentage points more likely to provide collateral. This Insight suggests that additional flood risk which will result from climate change is partially factored in by lenders. Some borrowers in areas where flood risk is predicted to increase face significantly larger interest rates. While the results suggest that lenders price in this important source of climate risk to some extent, and highlight some additional difficulty in obtaining credit for these borrowers, we find that the size of the flood risk premium is relatively small.

Suggested Citation

  • Carrol, James & Mahony, Michael & Morando, Bruno & O'Sullivan, Cormac & Shahabi Ahangarkolaee, Saeed, 2026. "Flood Risk, Interest Rates and Collateral Requirements: Evidence from Irish Firms," Central Bank Staff Insights 5/SI/26, Central Bank of Ireland.
    • Handle: RePEc:cbi:stafin:5/si/26
    as

    Download full text from publisher

    File URL: https://www.centralbank.ie/publication/research-publications/staff-insights/flood-risk--interest-rates-and-collateral-requirements--evidence-from-irish-firms
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cbi:stafin:5/si/26. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Fiona Farrelly (email available below). General contact details of provider: https://edirc.repec.org/data/cbigvie.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.