Climate risk primer for community banks: Concepts and policies during a period of significant change

Mike Gullette and Joe Pigg

The banking industry in the US is unique among financial services industries around the world. In most countries, a small number of very large companies serve virtually the entire country. In contrast, in the US a few dozen large institutions are accompanied by some 5,000 smaller banks that support specific communities and regions, and these banks must also compete with a variety of credit unions, non-regulated lenders (including fintechs), as well as the public lending markets. Consequently, many of these institutions operate much like small businesses. Like any small business, they are responsive to local market needs – indeed, even specific customer needs – offering expertise and client-based financing solutions that larger institutions are unable to efficiently provide. As a result, it is often difficult to distinguish the success of community banks from the success of their communities at large. With this in mind, it is also difficult to distinguish the challenges facing individual communities from the challenges facing community banks.

And so it is with the climate. The topic of climate change has become a flashpoint for highly politicised discussions around the world

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