https://macropaperwarehouse.com/authors/sarah-n.-hamerling/Sarah N. HamerlingHugo -- gohugo.ioen-ushttps://macropaperwarehouse.com/papers/how-bad-are-weather-disasters-for-banks/https://macropaperwarehouse.com/papers/how-bad-are-weather-disasters-for-banks/<p>Using FEMA disaster declarations matched to SHELDUS property-damage estimates and Call Report data for 1995–2018, this paper finds that weather disasters — even at their most severe — have had modest effects on U.S. bank safety over the last quarter century. For single-county banks exposed to 95th-percentile disasters, Z-scores decline by roughly 9 percent at a five-year horizon under the panel estimates; reaching failure thresholds from sample mean Z-score levels would require a disaster approximately 6.7 standard deviations more destructive than a 95th-percentile event. Federal disaster aid does not appear to be the primary driver of this resilience, since banks exposed to weather events without FEMA declarations exhibit similar stability. Instead, the paper points to a loan demand channel — multi-county bank lending increases roughly 0.25 percentage points per standard deviation of damage at five years without an accompanying interest-rate increase — and to local banks&rsquo; apparent avoidance of mortgage lending in flood-prone areas beyond what official flood maps predict, consistent with local information about true flood risk limiting exposure before disasters strike.</p>