Local banks key to mitigating climate-related risks – BDE paper

Study finds “outsider” banks less responsive to needs of companies affected by wildfires

Night long exposure photograph of the Santa Clarita wildfire in CA. The Santa Clarita Valley mountains has drawn firefighters and emergency crews in the hills toward Acton. So far, the fire has burned 38,346 acres.

Smaller, local banks do better than their larger counterparts in mitigating the economic effects of climate shocks, a study from the Bank of Spain has found.

The smaller lenders’ local knowledge is a key factor in this, Laura Álvarez-Román, Sergio Mayordomo, Carles Vergara-Alert and Xavier Vives argue in their working paper. 

Local banks in Spain have not reduced credit as much as “outsider” lenders have to companies that sustained physical damage from climate-related events, they find. 


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