Spatially Mapping Banks' Commercial & Industrial Loan Exposures: Including an Application to Climate-Related Risks

Benjamin Dennis, Gurubala Kotta (gskotta@ucdavis.edu) and Caroline Norris
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Gurubala Kotta: https://economics.ucdavis.edu/people/gurubala-kotta

No 2025-006, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: The correlation of the spatial distribution of banking exposures with changes in spatial patterns of economic activity (e.g., internal migration, changes in agglomeration patterns, climate change, etc.) may have financial stability implications. We therefore study the spatial distribution of large U.S. banks' commercial and industrial (C&I) lending portfolios. We construct a novel dataset that augments FR Y-14Q regulatory data with borrower microdata for a more granular understanding of where banks' exposures are located by looking beyond headquarters to the location of facilities. We find that banks are exposed to almost all U.S. counties, with clustered exposure in certain geographies. We then use our dataset for a climate-related application by analyzing what fraction of C&I loans have been extended to firms that operate in areas vulnerable to physical risks, identifying, for example, counties where both (i) banks are highly exposed via their lending portfolios, and (ii) physical risks have historically resulted in large losses. Results of this kind can help inform risk management and be used to improve resilience to future stresses.

Keywords: Bank lending to firms; Climate risks; Mapping of firm facilities; Spatial lending patterns (search for similar items in EconPapers)
JEL-codes: G21 Q54 R11 R32 (search for similar items in EconPapers)
Pages: 24 p.
Date: 2025-01-13
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2025-06

DOI: 10.17016/FEDS.2025.006

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