Some regional banks are highly exposed to flood risk. Yet, there is little evidence that banks manage these exposures. The lack of flood risk management in these banks could worsen the adverse local economic impact of a flood. Therefore, banks should incorporate flood risk in their risk management.

We investigate the effects of the risk of flooding and rising sea levels on the prices of single-family homes in Denmark. To that end, we combine data on the universe of housing transactions in Denmark since 1992 with rich data on the flood risk exposure of all Danish houses. Flood risks are...