Assessment of the Banking Sector’s Exposure to Hydrometeorological Events in Costa Rica

Irene Alvarado-Quesada (), Jose Pablo Barquero-Romero () and Cristian Sancho-Brenes ()
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Irene Alvarado-Quesada: Department of Economic Research, Central Bank of Costa Rica
Jose Pablo Barquero-Romero: Department of Economic Research, Central Bank of Costa Rica
Cristian Sancho-Brenes: Department of Economic Research, Central Bank of Costa Rica

No 2401, Ensayos de Política Económica from Banco Central de Costa Rica

Abstract: This study examines, for the first time, the exposure of the credit portfolio of the banking system in Costa Rica to hydrometeorological events, specifically excess rainfall events, with a focus on firm credit at the canton level. We propose a credit risk indicator to identify cantons with credit portfolios that are more affected by rainfall events. Moreover, we introduce a novel approach with respect to firm level data to assign a single productive location to firms with two or more establishments. We find that cantons with the highest number of excess rainfall events represent a small share of the average credit balance of the country. Furthermore, we observe that the top three cantons with the highest credit risk score are driven by economic activities that are not expected to be notably vulnerable to extreme rainfall.

Keywords: Hydrometeorological Events; Physical Risks; Banking Sector; Credit Risk (search for similar items in EconPapers)
JEL-codes: G21 G28 Q54 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2024-09
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Persistent link: https://EconPapers.repec.org/RePEc:apk:epolec:2401

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