The Central Bank of Seychelles has published two reports from its first assessments of climate-related financial risks in the banking sector. The findings indicate that average losses may remain low under normal conditions, but severe physical climate events could create significant risks in specific regions and sectors, weaken economic activity, make it harder for borrowers to repay loans, and put pressure on banks’ capital positions. A more detailed review of major lending exposures also found a high concentration of assets exposed to sea-level rise and tidal flooding. The Banking Sector Climate Risk Exposure Assessment Report provides a preliminary system-wide evaluation using climate hazard projections, geographic exposure data and stress testing. The Climate-related Financial Risk Assessment Report examines the 25 largest lending exposures from the two banks with the largest total assets and finds that more than 92% of the assessed loan portfolios are linked to assets in coastal zones highly vulnerable to climate hazards. Approximately SCR1.64 billion, or 54% of the analysed debt, falls into the critical risk category, while all loans in the high-risk category currently lack insurance coverage against physical climate events. Tourism, particularly large hotels, is identified as the most exposed sector with SCR574 million in lending exposures, followed by Commercial Development at SCR381 million and Telecommunications, Communication and Information at SCR340 million. The assessments are aligned with the implementation of the central bank’s Climate-related Financial Risk Supervision Strategy. Their findings will be used to develop climate risk analysis and supervisory frameworks further, including future climate stress-testing methodologies and exercises and efforts to improve climate data collection.
Central Bank of Seychelles 2026-05-11
Central Bank of Seychelles publishes climate risk assessments showing 92% of reviewed bank lending tied to vulnerable coastal assets
The Central Bank of Seychelles has published its first climate-related financial risk assessments of the banking sector, finding that while average losses may be low under normal conditions, severe physical climate events could significantly weaken economic activity, impair loan repayment and pressure banks’ capital, particularly where assets are exposed to sea-level rise and tidal flooding. A review of the 25 largest lending exposures at the two biggest banks shows over 92% of portfolios are tied to highly vulnerable coastal assets, with about SCR1.64 billion, or 54% of analysed debt, in the critical risk category and all high-risk loans lacking insurance. The findings will guide implementation of the central bank’s Climate-related Financial Risk Supervision Strategy and inform future climate stress-testing, supervisory frameworks and data collection.