Climate Transition Risks in Chile’s Banking Industry: A Loan-Level Stress Test

Felipe Córdova, Francisco Pinto and Mauricio Salas

Working Papers Central Bank of Chile from Central Bank of Chile

Abstract: This study provides the first loan-level climate transition risk stress test for Chile’s banking sector, combining granular credit data with NGFS short-term scenarios stem-ming from a general equilibrium framework. We estimate credit losses under orderly and disorderly transition pathways, integrating sectoral shocks with firm-level probabilities of default and addressing uncertainty through resampling. Results show that despite a gradual decline in exposure to carbon-intensive sectors, banks remain vul-nerable: losses under a disorderly transition could nearly double and rapidly approach levels seen during the Global Financial Crisis, with significant heterogeneity across institutions. These findings highlight the systemic and institution-specific nature of transition risks and underscore the need to embed climate risk into supervisory stress testing and capital planning to safeguard financial stability.

Date: 2026-03
New Economics Papers: this item is included in nep-fdg and nep-ifn
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.bcentral.cl/documents/33528/133326/Doc ... 224e?t=1772657179139 (application/pdf)

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:chb:bcchwp:1070

Access Statistics for this paper

More papers in Working Papers Central Bank of Chile from Central Bank of Chile Contact information at EDIRC.
Bibliographic data for series maintained by Sebastian Antinao ().