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dc.titleOn the Impact of Climate Change Scenarios on Bank Solvency in an Emerging Economy: The Case of Colombia
dc.contributor.authorBebczuk, Ricardo N.
dc.contributor.authorCelis, Carolina
dc.contributor.authorGalindo, Arturo
dc.contributor.orgunitCountry Department Southern Cone
dc.date.available2025-06-11T00:06:00
dc.date.issue2025-06-11T00:06:00
dc.description.abstractOver the last few decades, climate change has become a pressing issue due to its potentially deleterious effects on economic and social conditions worldwide in the years to come. These impacts can be expected to spill over to many markets, including the financial system. This paper seeks to quantify the potential long-run impact of climate risk on bank solvency in Colombia. To that end, it describes and classifies the risks climate change poses to banking system stability. It also reviews recent research to quantify its effects, with a particular emphasis on the nascent literature on developing and emerging economies. The paper presents new evidence for Colombia by developing a straightforward stress test methodology that provides an initial estimate of potential effects related to climate change scenarios. To implement the simulation, sectoral elasticities of non-performing loans to sectoral GDP growth are estimated for the first time, to the best of our knowledge. Given the low depth of credit in economic sectors highly vulnerable to climate change, the impacts of extreme climate change scenarios are not sizeable. However, in extreme scenarios, there could be simultaneous bank failures that may raise concern about their impact on overall financial stability.
dc.format.extent21
dc.identifier.doihttp://dx.doi.org/10.18235/0013549
dc.identifier.urlhttps://publications.iadb.org/publications/english/document/2025-06-03-Colombia-Climate-Change.pdf
dc.language.isoen
dc.publisherInter-American Development Bank
dc.subjectClimate Change
dc.subjectCredit Risk
dc.subjectGDP Growth
dc.subjectBanking Regulation
dc.subjectBank Loan
dc.subjectLoan Portfolio
dc.subjectEmerging Market
dc.subjectGross Domestic Product
dc.subjectClimate Risk
dc.subject.jelcodeG17 - Financial Forecasting and Simulation
dc.subject.jelcodeG21 - Banks • Depository Institutions • Micro Finance Institutions • Mortgages
dc.subject.jelcodeO13 - Agriculture • Natural Resources • Energy • Environment • Other Primary Products
dc.subject.jelcodeO54 - Latin America • Caribbean
dc.subject.jelcodeQ54 - Climate • Natural Disasters and Their Management • Global Warming
dc.subject.keywordsBanks;climate change;Colombia;Credit Risk;simulation;stress tests
idb.identifier.pubnumberIDB-TN-03150
idb.operationRG-T4571
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