It’s a cliché that leaders should never let a good crisis go to waste, but for generations of Bank of Montreal executives, periods of great upheaval have offered rare chances to reshape an institution that counts its constancy as an asset.
The novel coronavirus is only the latest calamity confronting BMO, which has weathered depressions, banking panics and World Wars over more than two centuries in business.
Past crises offer useful lessons for today’s banking leaders, even as executives stress the “unprecedented” threat posed by COVID-19, according to Laurence Mussio. He’s the author of Whom Fortune Favours: The Bank of Montreal and the Rise of North American Finance, a two-volume history of the bank published earlier this year.
“When the institution gets too set in its ways, that’s exactly when it falters,” Dr. Mussio, a business historian and consultant who advises senior executives in finance, said in an interview. “When it lets the time span catch it napping, when they don’t see the light until it shines through bullet holes.”
Dr. Mussio’s history of BMO was commissioned by the bank under former chief executive officer Bill Downe but written with editorial independence. It draws on more than 150 interviews with senior figures from the bank, as well as materials from BMO’s archive and other historical documents. The book chronicles several executives who, instead of simply battening down the hatches, chose to use crises to revamp the bank’s fortunes, through mergers or shifts in strategy. Here are four notable examples.
Edwin Henry King
Known to some as the “Napoleon of Canadian Finance,” King became BMO’s general manager in 1863 and president six years later, just as BMO had been losing ground to competitors. The bank set up offices in New York and became a power player in the city’s money market. When the U.S. Civil War threatened that lucrative business, but sent the value of gold soaring, BMO capitalized by using its plentiful gold reserves to profit from demand in New York. He “managed to completely turn the fortunes of the bank around in the 1860s, by taking advantage of a crisis,” Dr. Mussio said.
Sir Vincent Meredith
BMO emerged from the First World War scarred, after 230 of its bankers died in the conflict. But Meredith, its president since 1913, used a sense of postwar optimism to fuel the bank’s expansion. BMO increased its loans and discounts by 47 per cent from 1918 to 1920 and acquired a string of other banks – first the Bank of British North America in 1918, then the Colonial Bank in 1920, the Merchants Bank in 1921 and Molson Bank in 1924. The race to consolidate built a more resilient bank to weather the coming depression after the crash of 1929, Dr. Mussio said.
If King was Canadian finance’s Napoleon, Mr. Mulholland was BMO’s “saviour-general," Dr. Mussio said. An American who cut his teeth at Morgan Stanley, Mr. Mulholland joined BMO in 1970, at a time when its aging systems and structures were in need of an overhaul. Mr. Mulholland was made president in 1975, after the oil crisis of 1973 ushered in a turbulent economic period, adding urgency to the need for change. He ruthlessly cut layers of middle management, revamped technology systems and pushed the bank into international markets, purchasing Harris Bank in 1984, which formed the cornerstone for BMO’s U.S. business. “I don’t think people understand how critical that type of leadership was in that period to say, 'okay, this is not a social club any more,’ ” Dr. Mussio said.
Mr. Downe had a reputation for thriving under pressure when he became CEO in 2007. Confronted a year later with the worst financial crisis since the Great Depression, he was key to co-ordinating Canada’s response behind the scenes. As president of an advisory council to the U.S. Federal Reserve, he was able to relay key insights about what was melting down in the United States to then-Bank of Canada governor Mark Carney and finance minister Jim Flaherty. As the financial system started to emerge from the crisis, he made his biggest strategic move, buying Wisconsin-based bank Marshall & Ilsley Corp. for US$4.1-billion to give BMO critical mass in the U.S. Midwest. While most banks were still reeling, “he shoots the puck at the very right moment,” Dr. Mussio said.
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