Taiwan Financial Firms Tighten Collateral Systems and Loan Terms Against Flood Risk

Heavy rainfall and flooding caused by climate change have become the biggest physical risk facing Taiwan's financial industry. To prevent falling collateral values from driving up default rates, major banks have strengthened risk controls in recent years under the Task Force on Climate-related Financial Disclosures framework. Bank of Taiwan's short-term scenario analysis, for example, showed an expected mortgage loss rate of as much as 10.24% in areas at high risk of flooding, far above the overall average of 2.05%. The findings underscore the urgency of incorporating flood-risk data into appraisal systems to safeguard capital resilience.

The Commercial Times reported on July 11, 2026, that institutions including Mega International Commercial Bank and First Financial Holding have integrated flood-risk and soil-liquefaction data into their collateral management systems, lowering loan-to-value ratios for high-risk properties. Banks have also added provisions to credit agreements allowing them to demand early repayment of credit facilities if disaster damage reduces collateral values. SinoPac Financial Holdings has introduced ESG controls for high-flood-risk areas that account for about 0.57%–0.76% of its lending.