Natural disasters and bank stability: Evidence from the U.S. financial system

Felix Noth and Ulrich Schüwer

No 167, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: We show that property damages from weather-related natural disasters significantly weaken the stability of banks with business activities in affected regions, as re ected in lower z-scores, higher probabilities of default, higher non-performing assets ratios, higher foreclosure ratios, lower returns on assets, and lower bank equity ratios. The effects are economically relevant and suggest that insurance payments and public aid programs do not sufficiently protect bank borrowers against financial difficulties. We also find that the adverse effects on bank stability dissolve after some years if no further disasters occur during that time.

Keywords: natural disasters; bank stability; non-performing assets; bank performance (search for similar items in EconPapers)
JEL-codes: G21 Q54 (search for similar items in EconPapers)
Date: 2018, Revised 2018
New Economics Papers: this item is included in nep-ban and nep-rmg
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:167

DOI: 10.2139/ssrn.2921000

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