Climate Risk Governance, Supervisory Preparedness, and Bank Resilience in Iraq
An Empirical Assessment
Abstract
This paper examines how climate risk exposure; climate risk governance and supervisory preparedness influence bank resilience in Iraq. Employing a quantitative cross-sectional design, and a working sample of (260) banking professionals; the proposed links are assessed through partial least squares structural equation modelling ((PLS-SEM)). The results indicate that climate risk exposure negatively affects bank resilience (β = −0.22, p = 0.004) while positively influencing climate risk governance (β = 0.47, p < 0.001). Climate risk governance has a positive effect on bank resilience (β = 0.33, p < 0.001); and supervisory preparedness also contributes positively to resilience (β = 0.26, p = 0.002). In addition; climate risk governance partially mediates the relationship between climate risk exposure and bank resilience (β = 0.16, p < 0.001) while supervisory preparedness strengthens the positive effect of climate risk governance on resilience (β = 0.13, p = 0.028). The model shows (45%) of the variance in bank resilience. These results highlight the complementary roles of internal governance; and external supervision in strengthening banks capacity to manage climate-related financial risks. This research contributes empirical evidence from an under-researched climate-vulnerable, and oil-dependent banking environment, and offers practical implications for Iraqi banks and the Central Bank of Iraq.
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