CBS publishes findings on climate-related financial risks in the banking sector |14 May 2026
The Central Bank of Seychelles has published the outcomes of its first assessments of the banking sector’s vulnerability to climate-related threats as part of ongoing efforts to strengthen the resilience of the Seychelles financial system.
The findings are presented in two reports.
The first publication, the Banking Sector Climate Risk Exposure Assessment Report, presents a preliminary evaluation of the potential impact of physical climate risks on the overall banking sector and financial system stability. Using the Central Bank of Seychelles (CBS) Banking Sector Climate Risk Analysis Framework, the assessment combines climate hazard projections, geographic exposure data, and stress-testing techniques to evaluate how climate shocks could affect the economy and the financial sector.
The findings indicate that while average losses may remain low under normal conditions, severe events could create significant risks in specific regions and across key sectors such as real estate and tourism. Stress testing results further show that extreme climate events could weaken economic activity, make it harder for borrowers to repay loans and place pressure on the banks’ capital positions. While subject to data and modelling limitations, the report highlights the importance of integrating climate-related risks into the relevant supervisory frameworks.
The second publication, the Climate-related Financial Risk Assessment Report, provides a more detailed analysis of high-risk lending exposures and the vulnerability of associated assets and sectors exposed to climate hazards. The assessment is based on the 25 largest lending exposures from two banks with the largest total assets.
Key findings from the analysis indicate that more than 92 percent of the loan portfolios assessed are linked to assets located in coastal zones highly vulnerable to sea-level rise and tidal flooding. As a result of this vulnerability, approximately R1.64 billion, representing 54 percent of the analysed debt, falls within the ‘critical risk’ category.
The assessment also indicates that all loans within the high-risk category currently lack insurance coverage against physical climate events, highlighting a significant resilience gap.
Tourism, particularly large hotels, has been identified as the most exposed sector, with lending exposures valued at R574 million. This is followed by the commercial development sector at R381 million and the telecommunications, communication and information sector at R340 million.
The two assessments align with the implementation of CBS’s recently published Climate related Financial Risk Supervision Strategy. The findings will support the continued development of the bank’s climate risk analysis and supervisory frameworks, by informing future climate stress-testing methodologies and exercises, including efforts to improve climate data collection. The outcomes will also support efforts to address identified gaps, ensuring that the Seychelles banking sector remains resilient against both immediate physical impacts and the longer-term economic effects of climate change.
The reports can be accessed on the CBS website via the following link:
https://www.cbs.sc/Publications/ResearchWorkingPapers.html.
Press release from the CBS