Regulatory Planning Is Not Strategy. Boards Need Both.

Banks are often told they are weak at strategic planning, but that critique is usually incomplete. Most banks are very good at planning. It’s just that they often spend too much time planning for the wrong objective.

CRA Strategic Plans are a clear example. They require predefined assessment areas, quantified targets, annual milestones, and formal approval. The endpoint is regulatory satisfaction, not competitive advantage.

This makes perfect sense.

Regulators exist to protect the system. They care about fairness, soundness, and control. They assume the bank’s competitive strategy already exists, so their focus is on whether it is being managed responsibly in their eyes.

That assumption is where boards get into trouble.

What Regulators Ask For

When regulators use the term “strategic plan,” they mean something very specific. They want to see:

• Time-bound action plans.

• Measurable objectives.

• Clear governance and accountability.

• Evidence that management can execute safely and consistently.

What Strategy Actually Is

Strategy answers two fundamental questions, as Roger Martin reminds us:

• Where will we play?

• How will we win?

Real strategy requires trade-offs. It forces choices that make some paths unavailable. It defines what the institution will not do, just as clearly as what it will do.

Strategy is not:

• An annual operating plan

• A list of initiatives

• A budget

• A set of regulatory commitments

If everything is a priority, nothing is strategic. If every market matters, none of them can help define competitive advantage.

How Regulatory Planning Can Crowd Out Strategy

Most banks don’t under-invest in real strategy intentionally. They drift away from it.

Three forces drive that drift.

First, time horizons. Regulatory planning rewards near-term certainty. Strategy requires multi-cycle thinking and patience.

Second, incentives. Management is evaluated on plan completion, not on whether the bank’s position is getting stronger relative to competitors.

Third, culture. Over time, “strategic” becomes shorthand for “approved.” Once that happens, debate narrows and execution replaces choice.

Boards unintentionally reinforce this by over-indexing on dashboards and milestones, and under-investing in discussion how the bank is building and maintaining a sustainable competitive advantage.

The Cost of Getting This Wrong

Banks that substitute planning for strategy pay a price that gets higher over time.

Competitively, they drift toward parity products, weak pricing power, and fragile customer loyalty. They get stuck on the back foot, playing defense constantly.

Financially, growth adds complexity without competitive advantage. Returns compress. Risk increases without commensurate return.

Strategically, optionality disappears. When disruption accelerates, these banks have fewer credible paths forward because they never made hard choices when they still had time.

Separating Strategy from Regulatory Planning

Boards should insist on two distinct processes from managment.

First, a strategy framework that states:

• Where the bank will compete

• How it will win there

• What it will explicitly not pursue

Second, and separately, regulatory execution plans that translate those choices into time-bound actions, controls, and metrics.

Strategy sets direction. Regulatory planning proves discipline. When those are reversed, the institution optimizes for compliance instead of advantage.

The Questions Boards Should Be Asking

To force the distinction, boards should ask management:

• Where are we choosing not to compete?

• What advantage do we believe we have that competitors cannot easily copy?

• What would we stop doing if we are committed to this strategy?

• Which regulatory plans would change if our strategy changed?

If those questions feel uncomfortable, the board is doing its job.

A Practical Step Most Banks Miss

Add a standing “strategy delta” section to board materials.

One page. No metrics.

It should answer:

• What has changed in our competitive position?

• What choices are now harder or easier?

• What assumptions are no longer holding?

This creates strategic discipline without creating more planning theater.

The Board’s Responsibility

Regulators’ role is to ensure banks do not fail.

Strategy determines whether banks matter.

Boards that treat regulatory planning as strategy abdicate their most important duty.

The result is a well-managed institution with no clear reason to win.

Regulators ask banks to demonstrate discipline. Boards are responsible for direction.

Those are related, but they are not the same. When banks collapse regulatory planning into strategy, they become compliant, predictable, and increasingly interchangeable.

This distinction matters now more than ever.