Flood Risk, Interest Rates and Collateral Requirements: Evidence from Irish Firms

James Carroll, Michael Mahony, Bruno Morando, Cormac O'Sullivan and Saeed Shahabi Ahangarkolaee
Additional contact information
James Carroll: Central Bank of Ireland
Michael Mahony: Central Bank of Ireland
Bruno Morando: Central Bank of Ireland
Cormac O'Sullivan: Central Bank of Ireland
Saeed Shahabi Ahangarkolaee: Central Bank of Ireland

No 5/SI/26, Central Bank Staff Insights from Central Bank of Ireland

Abstract: We find that loans to borrowers in current flood risk areas (around 7 per cent of our sample) face an interest rate premium of roughly 7 to 13 basis points (which corresponds to a 3 per cent increase over the average interest rate charged in the sample) and are between 3 and 7 percentage points more likely to provide collateral. This Insight suggests that additional flood risk which will result from climate change is partially factored in by lenders. Some borrowers in areas where flood risk is predicted to increase face significantly larger interest rates. While the results suggest that lenders price in this important source of climate risk to some extent, and highlight some additional difficulty in obtaining credit for these borrowers, we find that the size of the flood risk premium is relatively small.

Date: 2026-05
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.centralbank.ie/publication/research-pu ... nce-from-irish-firms

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:cbi:stafin:5/si/26

Access Statistics for this paper

More papers in Central Bank Staff Insights from Central Bank of Ireland Contact information at EDIRC.
Bibliographic data for series maintained by Fiona Farrelly ().