By Lucy Craymer and Upasana Singh
(Reuters) – The Reserve Bank of New Zealand said on Tuesday a preliminary analysis of its climate change stress test indicated that river and surface water flooding may pose an even greater risk to lenders’ residential mortgage portfolios than coastal flooding.
It said in a statement that in its assessment it had focussed on banks’ exposure to river and surface water flood risk in the Auckland region.
“The results indicated that in a severe scenario, more than a quarter of the banks’ current Auckland mortgage lending was on land that could be impacted by flooding,” it said.
It also asked banks to measure the exposure in their mortgage portfolios to flood zones under varying degrees of sea level rise ranging from 20 centimetres to 1 metre.
“The results found there were significant differences in the share of mortgage lending on properties that lie within a coastal flood zone across different regions,” it noted.
The findings are part of the November 2022 Financial Stability Report, which is due to be released on Wednesday.
RBNZ Deputy Governor Christian Hawkesby said the aim of the exercise was to support banks to build their capability to identify climate risks and find solutions.
“This will lead to more proactive management of climate risk,” he said.
(Reporting by Lucy Craymer in Wellington and Upasana Singh in Bengaluru; Editing by Shinjini Ganguli and Matthew Lewis)
