I study the informational value of community resilience in credit markets during natural disasters. Exploiting a severe flood in Germany in 2013, I combine loan-level data on car loans with a composite measure of community resilience based on structural local characteristics linked to disaster recovery capacity. After the flood, only low-income borrowers faced credit tightening, but in high-resilience areas they experienced smaller rate hikes and maintained access to credit. Resilience also predicts repayment after disasters, yet banks ignore it in normal times. This state-contingent reliance shows that community resilience enters credit pricing only in crises, when its information content beyond standard borrower characteristics is valuable enough to justify adoption.
SAFE Working Paper No. 455
