A climate stress testing exercise on loans to European small and medium enterprises
This paper assesses the impact of floods on credit to European small and medium-sized enterprises (SMEs) using a discrete-time survival model.
We find a statistically significant relationship between the default probability of loans to SMEs and floods occurring in the region where the firm is located.
We propose a micro-level stress testing exercise to assess the performance of small business loans under different climate scenarios.
Our results allow us to identify the European regions with heightened vulnerability under a stressed climate scenario and to quantify the impacts upon individual firms in terms of increases in loan default probability.
CHEN Yujia;
DING Zhenghong;
BARBAGLIA Luca;
CALABRESE Raffaella;
FATICA Serena;
2025-07-30
European Commission
JRC142464
https://publications.jrc.ec.europa.eu/repository/handle/JRC142464,
https://publications.jrc.ec.europa.eu/repository/handle/JRC142464,
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