Abstract
This study analyses the impact of climate risk indicators on bank stability in Kenya based on descriptive and quantitative approaches on quarterly data covering thirty-five banks over the period 2009 to 2021. The analysis reveals a distinct warming trend, variable rainfall pattern and an increasing trend in greenhouse gas emissions especially in the agriculture and transport sectors. Banks’ climate financing for sustainable projects remains low. Empirical findings using dynamic panel estimation reveals adverse impact of temperature changes and rainfall variability on bank stability and credit risk arising from non-performing loans. The stress testing results reveal vulnerability of the banking sector to climate change as the probability of defaulting increases in moderate, severe, and extreme temperature changes. The results affirm banks’ important role in managing financial stability risks while providing sustainable climate financing and the need to strengthen synergies between private and public sustainable financing for target priority sectors.
Presenters
Maureen OdongoEconomist, Research, Central Bank of Kenya, Nairobi Municipality, Kenya Peter Wamalwa
Economist, Research, Central Bank of Kenya, Nairobi Municipality, Kenya
Details
Presentation Type
Paper Presentation in a Themed Session
Theme
Assessing Impacts in Diverse Ecosystems
KEYWORDS
CLIMATE CHANGE RISKS, BANK STABILITY, SUSTAINABLE CLIMATE FINANCING
