{"id":12730,"date":"2024-09-23T04:21:03","date_gmt":"2024-09-23T04:21:03","guid":{"rendered":"https:\/\/topat10.com\/?p=12730"},"modified":"2024-09-23T04:21:03","modified_gmt":"2024-09-23T04:21:03","slug":"the-next-banking-crisis-could-come-from-climate-change","status":"publish","type":"post","link":"https:\/\/topat10.com\/?p=12730","title":{"rendered":"The next banking crisis could come from climate change"},"content":{"rendered":"\n

America\u2019s smallest banks face potentially destructive losses from climate-related weather disasters, according to a first-of-its-kind report<\/a> from a climate change nonprofit. And they\u2019re not even aware of the risk.<\/p>\n

\n

Property damage from floods, wind, storm surges, hail, or wildfires threatens a collective $2.4 billion across nearly 200 national banks, averaging 1.5% of these banks\u2019 total portfolio value, according to First Street. Most of this risk is concentrated amid small regional or community banks. In fact, nearly one in three regional banks face significant climate risk. But large institutions aren\u2019t immune, with one in four facing such risks too, the report found.<\/p>\n

\u201cRisk exposure varies, but no matter the size of the institution, all banks had some level of climate risk within their lending footprint,\u201d Jeremy Porter, First Street\u2019s head of climate implications, told Fortune<\/em>. \u201cThe most vulnerable were regional, small, and community banks with highly concentrated portfolios in areas prone to flooding, wildfires, or hurricanes. However, even some of the larger banks faced significant enough risk to merit further scrutiny.\u201d\u00a0<\/p>\n

First Street conducted its analysis by looking at extreme weather risks in banks\u2019 physical locations and using it as a proxy for the commercial and residential properties on which banks have issued loans.\u00a0<\/p>\n

Nearly one-third of the nation\u2019s banks are exposed to climate-related risks that could reduce the value of their holdings by 1%, a threshold the Securities and Exchange Commission has defined as material.\u00a0<\/p>\n

\u201cIf you have any line item, as a publicly traded company, with the potential to lose 1% of value\u2026 you have to report it,\u201d First Street CEO Matthew Eby said. \u201cOn average, every single one of these small banks and community banks hold so much risk, they [would] all have to report it.\u201d\u00a0<\/p>\n

Why banks don\u2019t know\u00a0<\/strong><\/h2>\n

The SEC\u2019s 1% rule is currently on hold while it faces legal challenges\u2014but regardless, it and other financial reporting requirements exempt small banks. Experts say many of these institutions likely don\u2019t know just how risky their portfolios are. And the ballooning costs of weather-related disasters<\/a>, which are expected to rise dramatically as climate change worsens<\/a>, show why it\u2019s critical to understand such risks. Since the 1980s, floods, wildfires, hurricanes, and other weather disasters have caused an ever-rising amount of financial damage, much of it in areas previously immune to weather disasters.\u00a0<\/p>\n

\n