Local banks and flood risk: The case of Germany

This paper uses a simulation model to evaluate the effects of river flooding events occurring within Germany on regional banks. Floods increase overall bank losses by 0.1% under the current temperature level.The climate crisis has emerged as a significant threat to firms around the world, impacting not only their operations but also their debt repayment capacity. 

The findings show that the actual overall impact of physical risk seems to be more pronounced when it occurs during a pre-existing financial crisis. This holds true event without a dynamic mechanism that triggers the devaluation of assets located in area prone to flood events.