Dream of a Western Canadian bank just met reality facing regional players

financialpost.com:

When the Canadian Western Bank opened its doors in 1984, it was a bank on a mission.

In Alberta, exasperation with the big, Toronto-based banks stretched as far back as the early 1920s, but Ottawa’s National Energy Program and the early 1980s recession had raised frustrations to new levels.

Founded by Dr. Charles Allard and Eugene Pechet, what was originally known as the Bank of Alberta would be run by “common-sense people.” It would be headquartered in the West (Edmonton) where large banks “were sometimes hesitant to lend.” Management would be “nimble” and “non-bureaucratic,” and “decision-making would be local,” the founders declared. And finally, branch managers and their staff “would know local industries and get local business.”

By design, what soon became the Canadian Western Bank (CWB) was a different kind of Canadian bank, one that embodied a dream that many in Alberta and other parts of Western Canada have long held, to have their own bank, run by local people who understood their businesses.

But forty years after it opened, this week’s proposed $5-billion merger with Quebec-based National Bank showed that even CWB, despite its success in growing to 39 branches, mostly in Alberta, couldn’t achieve that mission solely as a regional player.

In Canada, sustainable success depends on building national banking franchises that facilitate greater access to capital and better risk management.

The history of Canada’s banks is a testament to this. Between 1867 and 1925 the Bank of Montreal absorbed seven other banks, deepening its reach into the Atlantic provinces, Ontario and the West. During the same period, Scotiabank merged with five banks, helping it consolidate its position in the Atlantic provinces and establish