How Bad Are Weather Disasters for Banks?

36 Pages Posted: 16 Nov 2021 Last revised: 22 Jan 2022

See all articles by Kristian Blickle

Kristian Blickle

Federal Reserve Banks - Federal Reserve Bank of New York

Sarah Ngo Hamerling

Federal Reserve Banks - Federal Reserve Bank of New York

Donald P. Morgan

Federal Reserve Bank of New York

Date Written: November 1, 2021

Abstract

Not very. We find that weather disasters over the last quarter century had insignificant or small effects on U.S. banks’ performance. This stability seems endogenous rather than a mere reflection of federal aid. Disasters increase loan demand, which offsets losses and actually boosts profits at larger banks. Local banks tend to avoid mortgage lending where floods are more common than official flood maps would predict, suggesting that local knowledge may also mitigate disaster impacts.

Keywords: hurricanes, wildfires, floods, climate change, weather disasters, FEMA, banks, financial stability, local knowledge

JEL Classification: G21, H84

Suggested Citation

Blickle, Kristian and Hamerling, Sarah Ngo and Morgan, Donald P., How Bad Are Weather Disasters for Banks? (November 1, 2021). FRB of New York Staff Report No. 990, 2021, Rev. Jan. 2022, Available at SSRN: https://ssrn.com/abstract=3961081 or http://dx.doi.org/10.2139/ssrn.3961081

Kristian Blickle (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

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New York, NY 10045
United States

Sarah Ngo Hamerling

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Donald P. Morgan

Federal Reserve Bank of New York ( email )

33 Liberty Street
Research Department
New York, NY 10045
United States
212-720-6573 (Phone)

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