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Exploring the exposure of Slovak banks’ corporate loan portfolio to flood risk

Author

Listed:
  • Lea Gogová

    (Národná banka Slovenska)

  • Juraj Hledik

    (Joint Research Centre)

  • Ján Klacso

    (Národná banka Slovenska)

Abstract

Climate change is expected to lead to more frequent and intense extreme weather events, such as floods and droughts, which in turn increase physical risks. In this paper, we assess the direct exposure of Slovak banks’ corporate loan portfolios to riverine flood risk. We propose several monitoring metrics and estimate exposures at risk due to riverine flood-ing. Our analysis leverages a comprehensive dataset that integrates flood risk maps from the European Commission’s Joint Research Centre, cadastral data on firm properties, credit register data, and firms’ financial statements. While a significant share of firms are located in flood-prone areas, only a subset are likely to face flood levels that exceed critical thresh-olds. Consequently, the direct impact of riverine flooding on corporate credit risk appears to be relatively moderate — with the estimated increase of exposure at default ranging from 2 to 10 basis points of the corporate loan portfolio under standard scenarios, and up to 50–60 basis points in conservative stress cases accounting for asset value declines. Under coun-terfactual scenarios assuming a fivefold increase in the frequency of floods, the estimated increase exceeds 1 percentage point of the loan portfolio.

Suggested Citation

  • Lea Gogová & Juraj Hledik & Ján Klacso, 2025. "Exploring the exposure of Slovak banks’ corporate loan portfolio to flood risk," Working and Discussion Papers WP 15/2025, Research Department, National Bank of Slovakia.
    • Handle: RePEc:svk:wpaper:1130
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • 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
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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