Bridging Risk, Regulation, and Behavior: Understanding Credit Tolerance Behavior in Crisis-Era Banking

The COVID-19 pandemic posed unprecedented challenges to the banking sector in Bali, exposing critical gaps between regulatory inten-‎tions and actual credit restructuring practices. This study examines the innovative concept of credit restructuring tolerance behavior (CRTB), ‎which provides a behavioral framework for comprehending account officers' (AOs) discretion in credit restructuring decision-making amid ‎crises, encompassing both psychological tendencies and organizational limitations. This study, grounded in an integrative framework of ‎social cognitive theory and the theory of planned behavior, investigates the influence of risk management knowledge, self-efficacy, herding ‎behavior, standard operating procedures (SOPs), and regulations on CRTB, while examining how gender and organizational culture affect ‎decision-making flexibility. To this end, a quantitative survey involving 290 AOs from 168 banks in Bali was conducted. Data were analyzed using structural equation modeling with a second-order embedded two-stage approach, supported by Mann–Whitney U tests for ‎group comparisons and robustness checks. The findings indicate that risk management knowledge and self-efficacy positively influence ‎CRTB, whereas herding behavior and rigid SOPs have a negative effect. Meanwhile, gender and cultural dimensions have significantly ‎different impacts, with women and employees in pragmatic cultures demonstrating greater adaptive capacity. These results underscore the ‎critical interplay between internal capacities and external structures. Enhancing employee knowledge, building employee confidence, and ‎revising SOPs to allow situational discretion can substantially improve the resilience of the banking sector. Based on the findings, policy-makers are encouraged to adopt non-coercive, flexible regulatory frameworks that empower front-line employees to respond effectively ‎during economic disruptions.