As a super El Niño cycle builds in the Pacific Ocean, banks whose clients are exposed to the climate phenomenon are now assessing loan structures and loss risks — with debt rescheduling among the options on the table. Spain’s BBVA has asked its local risk teams to review loan books across Peru, Argentina and Colombia, where the bank has a significant client base.
Crops in El Salvador amid El Niño conditions (Credits: Insurance Journal / Bloomberg)
BBVA Reviews Loan Terms as Super El Niño Threatens Borrowers
El Niño — the warming of the equatorial Pacific — is already fanning crop-damaging droughts and floods, the World Meteorological Organization says, with Southern Africa and Southeast Asia facing heightened risks and parts of Latin America vulnerable to both drought and flooding. Combined with global warming, the current cycle poses what BBVA calls “a unique set of threats” to its borrowers.
For its most vulnerable customers, BBVA said debt rescheduling is among the measures under consideration. “The data we are currently generating supports this management process,” the bank said in an analysis shared with Bloomberg. Once comfortable with its analysis, the bank will share the information with clients as part of its advisory process.
Banks, Money Managers Warn of Inflation and Trade Risks
The banking sector’s caution follows warnings from money managers that the intensity of this El Niño cycle will leave investors “nowhere to hide,” as the phenomenon disrupts commodity supplies, drives inflation and widens trade deficits. EU-based banks are under particular pressure to disclose such risks under evolving Pillar 3 disclosure rules. Bloomberg Intelligence analyst Grace Osborne warned of a heightened risk of banks resorting to “agricultural loan repayment holidays” after severe climate events, given the insurance protection gap in European agriculture — and flagged risks tied to loans exposed to water-intensive sectors.
Danske Bank, meanwhile, has cautioned that the fallout extends beyond commodities: companies headquartered outside El Niño’s immediate path may still be exposed through supply chains and trade flows. Insurance Journal’s reporting makes one thing clear — this super El Niño is already a boardroom issue, not just a weather story.
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Source: Insurance Journal — read the full story there.
