Banks and Natural Disasters

42 Pages Posted: 21 Aug 2019

See all articles by James R. Barth

James R. Barth

Auburn University; Milken Institute

Yanfei Sun

Ryerson University

Shen Zhang

Troy University

Date Written: August 16, 2019


Natural disasters are not rare and costless events. Indeed, the evidence indicates there has been an acceleration in the number of disasters and the associated costs over the past century. Such disasters can cause severe property damage in the communities affected. Typically, insurance policies and government disaster relief fail to cover the full amount of damages. In this case, banks can play an important supporting role in providing additional funding for the necessary reconstruction that takes place after disasters. We provide evidence that following natural disasters, banks with branches in the affected areas raise both deposit and loan rates, but the latter more than the former so that net interest margin increases. This, in turn, leads to an increase in return on assets for such banks, but not sufficiently large enough to indicate profiteering. At the same time, banks increase the use of brokered deposits after natural disasters to help fund the increased demand for loans by individuals and firms in affected communities. Thus banks located in the disaster-prone areas contribute to helping communities recover from natural disasters.

Keywords: Bank Performance, RateWatch, Natural Disaster

JEL Classification: G21

Suggested Citation

Barth, James R. and Sun, Yanfei and Zhang, Shen, Banks and Natural Disasters (August 16, 2019). Available at SSRN: or

James R. Barth (Contact Author)

Auburn University ( email )

415 West Magnolia Avenue
Auburn, AL 36849
United States
334-844-2469 (Phone)
334-844-4960 (Fax)

Milken Institute ( email )

1250 Fourth Street
Santa Monica, CA 90401
United States

Yanfei Sun

Ryerson University

350 Victoria Street
Toronto, Ontario M5B 2K3

Shen Zhang

Troy University ( email )

Troy, AL 36082
United States
(334) 808-6760 (Phone)

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