Norwegian and Swedish banks have the highest exposure to real estate relative to total lending among European peers. Nordic Credit Rating (NCR) generally views the strong securitisation of loan assets as beneficial to the credit assessment of banks’ portfolios. However, banks’ real-estate exposure leads to climate risk, both in terms of physical and transition risk.
The article published by NCR today looks at the transition and physical risks that the Norwegian and Swedish banking sectors are facing as a result of their real-estate exposure. It examines action by regulators and the banks themselves to increase transparency about these risks and how they can be mitigated.
"We expect banks to become more aware of the impact of climate risk on their credit portfolios," said NCR credit analyst Ylva Forsberg. "This includes integrating these risks into credit processes in a more systematic and rigorous manner than at present."