Akademik Veri Yönetim Sistemi
International Review of Economics and Finance, cilt.109, 2026 (SSCI, Scopus)
This paper investigates whether national climate vulnerability constitutes a structural driver of bank portfolio risk in China. Using panel data for 17 Chinese banks over 2015-2021, we estimate dynamic specifications using system generalized method of moments and report comprehensive diagnostic tests. Bank portfolio risk is proxied by risk density, defined as the ratio of risk-weighted assets to total assets, a Basel-consistent prudential measure. Climate risk is captured using three national indicators: the ND-GAIN Vulnerability Index, its Sensitivity component, and the IMF-adapted ND-GAIN Index. The results indicate that higher national climate vulnerability is associated with higher risk density. Estimated magnitudes are interpreted within a dynamic panel framework and reflect the strong persistence of portfolio risk. The findings are robust across indicators: the Vulnerability and Sensitivity measures yield statistically similar effects, while the IMF-adapted index produces smaller but qualitatively consistent coefficients. Heterogeneity analysis shows that larger and better-capitalized banks are significantly less exposed to climate-related risk. Transmission occurs through higher credit risk-weighted assets, higher non-performing loans, and a lower distance-to-default metric, indicating deteriorating credit quality and financial stability. Overall, the results establish climate vulnerability as a structural determinant of prudential risk and highlight supervisory priorities, including the integration of climate scenarios into stress testing, the calibration of capital buffers for exposed institutions, and enhanced disclosure to improve risk pricing.