Outdated browser

You are using an outdated browser. DNB.nl works best with:

Dutch banks' exposure to flood risks through corporate lending is limited


Dutch banks risk losses from coastal and river flooding through their loans to businesses. However, flood measures such as dykes and storm surge barriers mitigate most of the risk, even as climate change increases flood risks. Without flood measures, expected losses would total more than €2.5 billion a year. Thanks to the flood measures, however, expected annual losses total €30 million, new figures from DNB show.

Published: 18 April 2024

: Een inwoner van de stad Meerssen, gezien in zijn woonkamer in Nederland, is zijn spullen aan het inpakken nadat veel huizen zijn overstroomd door hevige regenval.

Of all loans which Dutch banks grant to euro area businesses, some 80% are to Dutch firms. As the Netherlands is largely situated in a river delta, almost 60% of its land area is at potential risk of flooding. This puts businesses at risk of flooding, and indirectly banks too.

Source: DNB statistics

At De Nederlandsche Bank, we independently compile statistics on the Dutch financial sector and economy. This article is based on these statistics. More information on our statistics and all dashboards can be found on our Statistics homepage.

If there were no dykes and other flood measures in the Netherlands, expected annual losses to banks on business loans due to coastal flooding would be over €2 billion. River floods would account for a further €0.5 billion or more in losses.

The Netherlands’ high level of flood protection ensures that most of the risk is mitigated. This decreases expected annual losses to €25 million for coastal flooding and €5 million for river flooding.

What exactly is it we calculate?

Much of the Netherlands is at potential risk of coastal or river flooding. This also poses risks for Dutch banks, for example when a flood causes damage to a firm’s fixed assets, such as buildings and machinery, so it can no longer repay its loan. The NEAR (Normalised Exposure At Risk) indicator expresses the Dutch banking sector's expected annual loss on corporate loans due to flooding. It takes into account both the intensity and probability of flooding. The NEAR indicator assumes that if a firms loses 10% of its assets due to a flood, 10% of the outstanding loan amount cannot be repaid. The indicator thus translates a firm’s losses into losses for banks.

The scope of the indicators covers loans to non-financial corporations by Dutch banks. It does not include residential mortgage loans and other consumer loans. Similarly, economic damage suffered by firms due to flooding, such as lost business, is not included in the figures. As a result, these figures probably underestimate actual losses. For more on these figures, see the 'Sustainability of the Dutch financial sector’ dashboard.

Climate change drives up future risks

Climate change increases the probability of flooding. Climate scientists have developed several scenarios, termed representative concentration pathways (RCP), which describe the evolution of greenhouse gas emissions.

For two such scenarios (RCP 4.5 and RCP 8.5), we have calculated expected annual losses on corporate loans due to flooding. RCP 4.5 is a moderate scenario, which assumes policy action aimed at reducing greenhouse gas emissions, without taking any drastic action. RCP 8.5 is the most extreme scenario in which emissions are not reduced during the 21st century, but instead continue to increase. Current expectations are that future emissions will remain below those in RCP 8.5.

The figures below show expected annual losses (normalised exposure at risk – NEAR) for coastal and river flooding, both with and without flood measures and under different climate scenarios.

Climate change drives up future bank risks of both coastal and river flooding. The increase compared to earlier years is limited because the Netherlands would already potentially have been at high risk of flooding in the past had it not taken any flood measures. The increase is therefore more pronounced when considering expected losses including flood measures. Current flood measures will no longer provide the same level of protection under the various future scenarios, resulting in a relatively higher increase in expected losses.

Experimental statistics

The NEAR indicators described in this news item are part of a set of sustainability indicators which we developed jointly with the ECB and other euro area central banks. There are a number of caveats to these figures. First, the figures only include losses resulting from damage to fixed assets, such as buildings and machinery. Second, not all business locations are covered, but only those of head offices. These figures therefore marked as 'experimental' and their quality is not yet comparable to that of our regular statistics.

Discover related articles