EconPapers    
Economics at your fingertips  
 

Impact of extreme weather episodes on the Philippine banking sector – Evidence using branch-level supervisory data

Veronica Bayangos, Rafael Augusto D. Cachuela and Fatima Lourdes E. Del Prado

Latin American Journal of Central Banking (previously Monetaria), 2021, vol. 2, issue 1

Abstract: There is growing recognition that natural disasters and severe weather-related events pose risks that can potentially and unintentionally affect the financial performance of the banking system. This study provides further indication that severe weather conditions have an impact on the financial performance of smaller banking units. The paper first constructs a regional quarterly rainfall damage index (RDI) based on data from weather stations across the country. A regional branch-level database from supervisory reports is then compiled based on 11,000 banking units from the Bangko Sentral’s (BSP) Branch Regional Information System (BRIS). Using the dynamic panel generalized method of moments (GMM), we find evidence of a deterioration in branch-level loan growth and loan quality as savings and time deposit liabilities contract and nonperforming loans surge following extreme rainfall events from 2014 to 2018. These are particularly evident in regions most vulnerable to severe rainfall episodes and to branches of universal and commercial banks as well as those of rural and cooperative banks. However, the overall negative impact on profitability seems to eventually taper off. These findings are robust across different specifications and alternative estimation methods such as fixed effects and panel vector autoregression estimations.

Keywords: Climate change; Physical risk; Extreme weather episodes; Banking supervision; Sustainable finance (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S266614382100003X
Gold Open Access

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:lajcba:v:2:y:2021:i:1:s266614382100003x

DOI: 10.1016/j.latcb.2021.100023

Access Statistics for this article

Latin American Journal of Central Banking (previously Monetaria) is currently edited by Manuel Ramos-Francia

More articles in Latin American Journal of Central Banking (previously Monetaria) from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2021-11-30
Handle: RePEc:eee:lajcba:v:2:y:2021:i:1:s266614382100003x