TEMPORAL INEFFICIENCIES IN RISK RECOGNITION: A CAUSAL ANALYSIS OF RISK PERCEPTION LAG IN GLOBAL BANKING SYSTEMS

Abstract

This paper develops a theoretical and empirical framework to measure Risk Perception Lag (RPL), the temporal distance between the objective realization of an economic shock and its subsequent incorporation into internal bank risk measurement and provisioning systems. Utilizing a comprehensive global panel of 320 commercial banks from 2011 to 2024, the author decomposes RPL into three structural dimensions: informational frictions, model inertia, and institutional delay. Methodologically, the study employs a two-step System GMM estimator to address the dynamic persistence and endogeneity inherent in risk recognition, alongside a Difference-in-Differences (DiD) design centered on the mandatory adoption of IFRS 9 and CECL. The results indicate that while the transition to forward-looking accounting has reduced average lag, structural inefficiencies, particularly rigid model recalibration cycles and governance complexity, continue to drive significant temporal gaps. Furthermore, the author finds evidence of an asymmetric “stigma effect” and forbearance incentives: banks are quick to recognize severe credit deteriorations to signal ”kitchen-sinking” but delay the recognition of marginal deteriorations to prevent capital depletion. These findings provide critical insights for macroprudential surveillance, the calibration of countercyclical capital buffers, and the ongoing refinement of Basel IV and IFRS 9 frameworks.