The central bank explores financial system risks from climate change
Preliminary climate-related stress-testing analysis has indicated that river and surface-water flooding may pose an even greater risk to bank residential mortgage portfolios than coastal flooding, the Reserve Bank of New Zealand said.
The central bank’s assessment of banks’ exposure to river and surface-water flood risk was focused on the Auckland region.
Read more: NAB says flooding raises questions about funding in risky areas
“The results indicated that in a severe scenario, more than a quarter of the banks’ current Auckland mortgage lending was on land that could be impacted by flooding,” RBNZ said in a statement.
RBNZ’s coastal flooding exercise also asked banks to measure the exposure in their mortgage portfolios to flood zones under varying levels of sea-level rise ranging from 20 centimetres to one metre.
“The results found there were significant differences in the share of mortgage lending on properties that lie within a coastal flood zone across different regions,” it said.
Read next: Average annual cost of river flooding to residential buildings hits $100m
The findings form part of RBNZ’s forthcoming November 2022 Financial Stability Report. Detailed analysis of the flooding results will be published next year.
RBNZ Deputy Governor Christian Hawkesby said the exercise will help the central bank explore financial system risks from climate change as well as build and design further climate-related stress-testing activities.
