Will Robinson
Chief Executive Officer

In this difficult operating environment, bank directors are constantly assessing how their institutions will navigate the troubles ahead. Outside of defensive maneuvers to protect deposits and shore up credit, many boards are also reviewing growth plans: M&A opportunities, expanding the bank’s footprint into new markets or rolling out new products.

The process for prioritizing growth initiatives typically involves market studies, competitive positioning, staffing plans, communications and marketing, and the pro forma financial impact on areas like credit, deposits and efficiency. Occasionally, there will be a consideration of the potential regulatory impact — but many boards may be of the view that compliance is a necessary evil, the tax for operating a bank. They may be tempted to allocate little attention or budget toward compliance, directing management to “keep the bank out of trouble.”

However, many of the fastest-growing banks have a common secret weapon: a high-quality compliance function that is integral to assessing and implementing their strategic initiatives.

Why include compliance in growth plans? Because compliance teams are ultimately responsible for data integrity and can best help a board understand the operational and regulatory impacts of any new initiatives. Further, these teams are critical to successful — and timely — implementations, and frequently act as a check on risk and progress against stated goals. There are five areas where high-performing institutions leverage their compliance function to achieve growth initiatives.

1. Acquisitions
Any bank acquisition invites increased regulatory scrutiny of existing operations. Too many acquisition efforts get derailed due to poor existing operational deficiencies, both at the target and the acquirer.

Strong compliance teams have a good grasp on existing operations and can help diligence the target’s processes and data. Further, they can identify deficiencies proactively so that, during post-close integration, the team can quickly assume the target’s operations and fold in reporting requirements into their existing structure.

2. New Products
Some of the best-performing banks have successfully coupled a new product offering with the opportunity to better achieve fair lending targets. For example, San Antonio-based Frost Bank recently reentered the residential mortgage market after a 20-year break. Their first two products are specifically tailored to lower-income applicants in their core Texas markets, which is brilliant, given the dramatic rise in home prices in recent years. Naturally, these loans also qualify for CRA credit and allow Frost to achieve its goal of creating more equitable communities.

For banks to pull off this type of growth, the compliance team must have a clear view of existing fair lending data and the ability to quickly stand-up new processes to support the additional reporting.

3. New Markets
Just like launching a new product, the biggest noncommercial risk banks take when moving into a new market is the impact on fair lending. Screwups in fair lending reporting typically derail growth — to add insult to injury, the data is public for competitors to see. The best compliance teams have a strong handle on their existing fair lending data and can forecast various scenarios associated with moving into a market.

4. Automation and Artificial Intelligence
AI is all the rage right now; every bank board is wrestling with how to incorporate more automation into existing operations. Surprisingly, the compliance team is best suited to take the lead here. Given their role as data stewards and typically held accountable for reporting accurate data to the appropriate agencies, strong compliance teams can clearly articulate the areas of the bank where process improvement will best impact operations. Compliance teams acutely feel the pain of poor data management practices and should be the first group management consults when implementing new automation technology.

5. Data Analytics
To accurately assess potential growth plans, the bank needs a clear set of operating data that everyone trusts. Very few bank executives believe their data is clean, accurate and easily accessible. Many banks don’t use the data they collect, as it lives in disparate systems and can be hard to analyze.

When prioritizing future growth initiatives, it’s critical that directors involve the compliance team. This group has some of the clearest insights into existing performance and areas of risk, due to their strong handle on the bank’s data. The best-performing banks understand this and use their compliance function as a hidden superpower to successfully execute growth plans.