High water, no marks? Biased lending after extreme weather

Garbarino, Nicola und Guin, Benjamin (2021): High water, no marks? Biased lending after extreme weather. In: Journal of Financial Stability, Bd. 54, 100874

Abstract

Policymakers have put forward proposals to ensure that banks do not underestimate long-term risks from climate change. To examine how lenders account for extreme weather, we compare matched repeat mortgage and property transactions around a severe flood event in England in 2013-14. First, lender va-luations do not mark-to-market against local price declines. As a result valuations are biased upwards. Second, lenders do not offset this valuation bias by adjusting interest rates or loan amounts. Third, bor-rowers with low credit risk self-select into high flood risk areas. Overall, these results suggest that lenders do not track closely the impact of extreme weather ex-post , and that public flood insurance programs subsidize high income households in some areas. (c) 2021 Published by Elsevier B.V.

• Dokumententyp: Zeitschriftenartikel
• Fakultät: Volkswirtschaft
• Themengebiete: 300 Sozialwissenschaften > 330 Wirtschaft
• ISSN: 1572-3089
• Sprache: Englisch