Banks Review El Niño Loan Risks as Repayment Options Emerge

Major international banks are reviewing loan portfolios and considering repayment adjustments as an intensifying El Niño raises concerns about climate-related credit losses. BBVA, Standard Chartered, Santander, and other lenders are assessing borrowers' financial exposure to droughts, floods, and agricultural disruption, with debt rescheduling and repayment holidays among the measures under consideration. According to reporting published by Bloomberg on 1 November 2026, Peru's Credicorp estimates that approximately 9% of its loan portfolio is directly exposed to clients vulnerable to El Niño, while Santander has identified €1.7 billion in agriculture, forestry and fishing loans exposed to physical climate risks.

The assessments reflect growing concern that extreme weather can affect borrowers' ability to service debt, particularly in agriculture, commodities and sectors dependent on vulnerable supply chains. The World Meteorological Organization has identified heightened weather risks across Southern Africa and Southeast Asia, while parts of Latin America face both drought and flooding. Financial institutions are increasingly incorporating these physical risks into credit assessments and customer monitoring as El Niño develops.

 

BBVA Reviews Loan Portfolios Across Latin America

 

Spanish banking group BBVA has instructed local risk teams to examine lending portfolios in markets including Peru, Argentina and Colombia, where climate-sensitive industries face potential disruption from El Niño. The bank is analyzing how weather-related losses could affect borrowers and whether it may need to adjust existing lending arrangements. Debt rescheduling is among the options being considered for customers facing significant exposure, although the bank has not announced a general restructuring program.

BBVA is developing a two-stage assessment process combining historical climate data with forward-looking meteorological information. The first stage compares neutral climate conditions with previous severe El Niño events to evaluate potential financial impacts. The second stage will incorporate seasonal weather models and monthly updates to establish an early-warning system for vulnerable borrowers. The bank intends to share relevant findings with clients once it completes its analysis.

 

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Agricultural Borrowers Face Growing Repayment Risks

 

Agriculture and fisheries are among the sectors most directly exposed to El Niño because droughts, excessive rainfall and changing ocean conditions can disrupt production and revenue. Such disruptions may reduce farmers' and businesses' capacity to meet scheduled loan repayments, particularly where insurance coverage is limited. Grace Osborne, a sustainable finance analyst at Bloomberg Intelligence, highlighted the possibility of "agricultural loan repayment holidays following severe climate events, given the insurance protection gap in European agriculture."

Some financial institutions have already introduced provisions addressing these risks. Peru's Intercorp Financial Services has established special El Niño-related lending clauses for agricultural and fishing customers, including options for grace periods and repayment rescheduling. Banco do Brasil is also monitoring the phenomenon, while Credicorp's estimate that 9% of its loan book faces direct exposure illustrates the potential significance of climate-related risks for lenders operating in vulnerable regions.

 

European Banks Quantify Physical Climate Exposure

 

European banks are assessing these risks alongside regulatory requirements to disclose climate-related financial exposures. Under the European Union's Pillar 3 framework, banks must report information on environmental, social and governance risks, including physical climate risks. These assessments help institutions identify lending concentrations that could be affected by extreme weather and evaluate potential changes in default probabilities and credit losses.

Santander has identified €1.7 billion in agriculture, forestry and fishing loans exposed to physical climate risks, representing 56% of its lending to those sectors. CaixaBank reported that approximately 60% of its agriculture, livestock and fishing portfolio is classified as sensitive to physical risks. However, those sectors account for less than 1% of CaixaBank's total lending, limiting their overall contribution to the bank's climate risk exposure. Santander has introduced weekly weather bulletins and monthly El Niño updates, while CaixaBank uses a framework to assess how weather events affect credit risk metrics.

 

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Standard Chartered Expands Client-Level Climate Assessments

 

Standard Chartered is strengthening its assessment of climate-related financial risks across corporate and investment banking operations, particularly in markets across Africa, the Middle East and Asia. The bank has conducted portfolio-level analysis and is incorporating those findings into assessments of individual customers. It is also monitoring physical threats to operating locations and data centers, including flooding, storms and extreme heat.

Karen Wilkinson, Global Head of Climate, Sustainability and Reputational Risk at Standard Chartered, said, "We are closely monitoring the potential impacts of El Niño." The bank's approach reflects growing recognition that weather-related financial risks can extend beyond businesses directly affected by extreme conditions. Danske Bank has also highlighted potential disruption to shipping and logistics supply chains, while analysts at JPMorgan and Citi have examined broader economic risks tied to agricultural output, commodity prices, and energy markets.

 

Climate Risk Monitoring Becomes Central to Lending Decisions

 

The developing El Niño is increasing the importance of forward-looking climate assessments in banking, particularly where lenders have significant exposure to agricultural production, commodities and geographically concentrated industries. However, translating weather forecasts into reliable credit risk estimates remains challenging. Sebastian Werner, Head of Climate Risk Scenario Design at Citi, has cautioned that widely used measures of El Niño strength do not capture every aspect of the phenomenon, complicating financial risk modeling.

As banks refine their assessments, the findings could influence how they structure loans, monitor vulnerable borrowers and prepare contingency measures. While some lenders are already offering specialized repayment arrangements, others remain at the risk-assessment stage. The effectiveness of these approaches will depend on the accuracy of climate data, the identification of exposed borrowers and the ability of financial institutions to respond before weather-related disruption develops into material credit losses.

 

Source: Bloomberg