Assessment of the banking sector’s exposure to hydrometeorological events in Costa Rica

Resumen

This study explores, for the first time, the impact of hydrometeorological events –in the form of excess rainfall events– on the credit portfolio of Costa Rican firms at the cantonal level. We propose a physical risk indicator to identify the cantons with the highest credit risk. Moreover, we present an innovative approach with respect to firm level data to assign a single productive location to firms with two or more establishments (locations. We find that cantons with the highest number of excess rainfall events represent a small share of the average credit balance of the country. Furthermore, we observe that the top three cantons with the highest credit risk score are driven by economic activities that are not expected to be notably vulnerable to extreme rainfall.

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