Brick-and-Mortar Bank branches and local resilience to natural disasters

Event Date: 13 December 2023

Speaker: Professor Arif Khursed (University of Manchester)

Time: 2pm

Location: Stenhouse Wing, SW104

Abstract:

Natural disasters are getting more frequent and economically disruptive (IMF 2017). As important economic agents, banks are expected to help disaster-hit regions to recover from the aftermath. However, digitalization of financial services and cost-cutting measures are leading to the closure of brick-and-mortar bank branches at an unprecedented speed. We show that the presence of brick-and-mortar bank branches alleviates the negative impact of disasters on local economies. Post-disaster, this alleviating effect exists both in the short and long term. It is more pronounced in less frequently affected communities, regions with larger banks and regions with more inter-state bank branches. Physical bank presence helps to moderate loan supply shocks in the immediate aftermath of disasters. Our findings suggest banks’ physical presence is necessary as a precaution against disaster-induced economic emergencies.

Published: 7 December 2023