Research On The Relationship Between Climate Change And Operational Risk Of Local Commercial Banks

With the general rise of global temperature,the main climate characteristics such as temperature and precipitation in various regions are constantly changing,and meteorological disasters and extreme weather events are becoming more and more frequent,affecting the normal operation and development of economy and society.Facing the problem of climate change,China has promised to the world that we will strive to achieve the carbon peak and neutrality goals.Under this background,commercial banks,as a critical role in the financial system,must pay more attention to various risks that may be brought about by climate change and prevent the damage caused by the “Green Swan” incidents.Especially for local commercial banks,their operational characteristics determine that they may be more sensitive to climate change-related risks.The purpose of this paper is to analyze the relationship between climate change and the operational risk of local commercial banks from both theoretical and empirical aspects,and to fully understand the ways in which climate change affects the operational risk of local commercial banks and the extent to which climate factors affect bank risk.This provides a basis for such banks to adapt to climate change,enhance risk management,moderate cross-regional operation and achieve green finance.This paper focuses on local commercial banks and clarifies the relevant research results of climate change and local commercial banks through many literatures.In terms of qualitative research,this paper analyzes two main transmission paths and four specific manifestations of the impact of climate change on the operational risk of local commercial banks.In the aspect of quantitative research,this paper takes 212 local commercial banks covering 29 provinces across the country as the research samples,and collecting their risk data for 11 years from2010 to 2020,and using the annual average temperature and annual precipitation are used as the measure of climate change.The characteristic variables and macroeconomic variables of commercial banks are selected to be used as the control variables.The fixed effect model was used to empirically study the changing direction and extent of the local commercial bank’s operational risk affected by the climate conditions.The results show that the climatic factors both significantly affect the operational risk of local commercial banks;the relationship between temperature factor and the proportion of risk-weighted assets of banks is "inverted U-Shape";the relationship between precipitation and the proportion of risk-weighted assets and non-performing loan ratio is "U-Shape".Finally,the paper puts forward some suggestions for local commercial banks to cope with climate change from the perspectives of banks and regulatory authorities.