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Natural disasters and bank stability: Evidence from the U.S. financial system

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  • Noth, Felix
  • Schüwer, Ulrich

Abstract

We show that weather-related natural disasters in the United States significantly weaken the financial stability of banks with business activities in affected regions. This is reflected in higher probabilities of default, lower z-scores, higher non-performing assets ratios, higher foreclosure ratios, lower returns on assets and lower equity ratios of affected banks in the years following a natural disaster. The effects are economically relevant and highlight the financial vulnerability of banks and their borrowers despite insurances and public aid programs.

Suggested Citation

  • Noth, Felix & Schüwer, Ulrich, 2023. "Natural disasters and bank stability: Evidence from the U.S. financial system," Journal of Environmental Economics and Management, Elsevier, vol. 119(C).
    • Handle: RePEc:eee:jeeman:v:119:y:2023:i:c:s0095069623000104
    DOI: 10.1016/j.jeem.2023.102792
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    Cited by:

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    2. Chiaramonte, Laura & Dreassi, Alberto & Goodell, John W. & Paltrinieri, Andrea & Piserà, Stefano, 2024. "Banks’ environmental policies and banks’ financial stability," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 91(C).
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    6. Chabot, Miia & Bertrand, Jean-Louis, 2023. "Climate risks and financial stability: Evidence from the European financial system," Journal of Financial Stability, Elsevier, vol. 69(C).

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    More about this item

    Keywords

    Natural disasters; Bank stability; Non-performing assets; Bank performance;
    All these keywords.

    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

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