New Zealand’s central bank says river flooding poses a greater risk to creditors’ mortgage portfolios.
The Reserve Bank of New Zealand said on Tuesday that preliminary analysis of a climate change stress test suggested river and surface water flooding could pose a greater risk to creditors’ residential mortgage portfolios than coastal flooding.
It said in a statement that it focused its assessment on banks’ exposure to river and surface water flooding in the Auckland area.
“The results indicated that in a severe scenario, more than a quarter of current mortgages to banks in the Auckland area were on land at risk of flooding,” it said.
The study also asked banks to measure the exposure of their mortgage portfolios to floodplains of varying degrees of sea level rise, ranging from 20 centimeters to one metre.
He pointed out that “the results showed that there were statistically significant differences in the percentage of mortgages on real estate located in the coastal flood zone in various regions.”
The findings are part of the November 2022 Financial Stability Report, due for release on Wednesday.
RBNZ Deputy Governor Christian Hoxby said the aim of the exercise was to help banks build their capacity to identify climate risks and find solutions.
“This will lead to a more proactive management of climate risks,” he said.
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