The Shocks of Climate Change on Bank Loans


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Authors

  • Agus Sugiarto Financial Services Authority of Indonesia, Indonesia.
  • Ni Nyoman Puspani Financial Services Authority of Indonesia, Indonesia.
  • Mustika Septiyas Trisilia Financial Services Authority of Indonesia, Indonesia.

DOI:

https://doi.org/10.32479/ijeep.14773

Keywords:

Climate Change, Financial Risk, Panel Data

Abstract

Climate change poses new challenges to the banking sector. Thus, in this paper, we investigate the effect of climate change on bank loans using panel data covering 7,865 banks in Indonesia from 2011-2021. We define bank loans into three variables, i.e., outstanding credit, non-performing loans (NPLs), and interest rates. Our results suggest that, of the six climate-related disasters, the flood has a significant and consistent effect. An increase in the frequency of floods reduces credit and increases NPLs. Consistent results are found for disaster risk index scores. The empirical results show that there is a negative effect of climate change on bank loans so further policies from banks and regulators' side are needed.

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Published

2023-09-16

How to Cite

Sugiarto, A., Puspani, N. N., & Trisilia, M. S. (2023). The Shocks of Climate Change on Bank Loans. International Journal of Energy Economics and Policy, 13(5), 493–514. https://doi.org/10.32479/ijeep.14773

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Section

Articles