FEDS Paper: Spatially Mapping Banks’ Commercial & Industrial Loan Exposures: Including an Application to Climate-Related Risks
Introduction
The Federal Reserve Board (FRB) recently published a paper titled “Spatially Mapping Banks’ Commercial & Industrial Loan Exposures: Including an Application to Climate-Related Risks.” The paper presents a new methodology for mapping banks’ commercial and industrial (C&I) loan exposures at a detailed geographic level. This methodology can be used to assess the potential impact of climate-related risks on banks’ loan portfolios.
Methodology
The FRB’s methodology uses data from the Call Reports to map banks’ C&I loan exposures at the census tract level. The methodology takes into account the location of the borrowing firms, the size of the loans, and the industry of the borrowers.
Results
The FRB’s analysis finds that banks’ C&I loan exposures are concentrated in a few geographic areas. The top 10% of census tracts account for over 50% of total C&I loan exposures. These areas are typically located in large metropolitan areas and are home to a large number of businesses.
The FRB’s analysis also finds that banks’ C&I loan exposures are more concentrated in certain industries. The top 10% of industries account for over 60% of total C&I loan exposures. These industries include manufacturing, healthcare, and real estate.
Application to Climate-Related Risks
The FRB’s methodology can be used to assess the potential impact of climate-related risks on banks’ loan portfolios. By overlaying the spatial distribution of banks’ C&I loan exposures with the spatial distribution of climate-related risks, banks can identify areas where their loan portfolios are most at risk.
The FRB’s analysis finds that banks’ C&I loan exposures are more concentrated in areas that are at high risk of flooding and sea-level rise. These areas are typically located along the coastlines and in low-lying areas.
Policy Implications
The FRB’s paper has important implications for bank regulators and policymakers. The paper provides a new tool that can be used to assess the potential impact of climate-related risks on banks’ loan portfolios. This information can be used to develop policies to mitigate these risks.
The FRB’s paper also highlights the need for banks to develop their own climate-related risk management frameworks. Banks should develop strategies to identify, assess, and mitigate climate-related risks to their loan portfolios.
Conclusion
The FRB’s paper provides a valuable new tool for assessing the potential impact of climate-related risks on banks’ loan portfolios. This information can be used to develop policies to mitigate these risks and to help banks develop their own climate-related risk management frameworks.
FEDS Paper: Spatially Mapping Banks’ Commercial & Industrial Loan Exposures: Including an Application to Climate-Related Risks
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FRB a new article on 2025-01-13 18:31 titled “FEDS Paper: Spatially Mapping Banks’ Commercial & Industrial Loan Exposures: Including an Application to Climate-Related Risks”. Please write a detailed article on this news item, including any relevant information. Answers should be in English.
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