The Czech National Bank has published a working paper examining whether chronic physical climate risk affects corporate credit allocation, using drought as the focal risk for the Czech economy. Combining granular AnaCredit data with district-level measures of drought-related agricultural losses, the paper finds that long-term drought exposure is associated with a significant contraction in new corporate lending, with newly originated credit declining by about 12 percent in drought-affected regions. The analysis covers almost 6 million bank-firm-month observations for nearly 140,000 firms between 2019 and 2023. The effect is concentrated at the loan origination margin, while outstanding credit volumes adjust more gradually. The paper also finds variation across bank-firm relationships, credit-exposure characteristics and sectors, consistent with banks reflecting chronic physical climate risk mainly in new lending decisions rather than by immediately cutting existing exposures.
Czech National Bank2026-07-20
Czech National Bank publishes paper finding long-term drought exposure cuts new corporate lending by about 12 percent
The Czech National Bank published a working paper on drought-related climate risk and corporate lending. Using AnaCredit data and district-level drought loss measures, it finds that long-term drought exposure is linked to about a 12 percent fall in newly originated corporate credit in affected regions. Outstanding credit adjusts more slowly, suggesting banks price this risk mainly through new lending.