Flaherty says banks need funds, seeks new G7 talks

Thu Oct 9, 2008 11:57am EDT
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By Randall Palmer

OTTAWA (Reuters) - The Canadian government sees no need to bail out its banks, but it said on Thursday it is looking at ways to ease "severe restrictions" in lending and it also called for a second G7 finance ministers meeting.

"I have concerns about the availability of credit," Finance Minister Jim Flaherty told a news conference. "Interbank lending has been virtually frozen globally."

He said he has no question about the solvency of Canada's banks but said that deterioration in credit markets was beginning to squeeze their ability to raise longer-term funds and the government was looking at steps to alleviate the problem.

Flaherty said this weekend's meeting of finance ministers of the Group of Seven leading industrialized nations will be the most serious such gathering since he took office in 2006 and that the meeting will strengthen a coordinated response.

It will identify additional steps to get at the root causes of the financial turbulence, he said.

"Given that the turmoil is likely to continue, I have called for G7 finance ministers to meet a second time in the coming weeks to ensure the active implementation of these measures," Flaherty told a news conference.

Canada also strongly backs France's call for a G7 summit. The political will exists for such a meeting and this weekend would be the time to look at when it could be scheduled, he said.

"There's nothing more important going on right now in terms of the lives of people and preserving jobs and preserving investments than this credit crisis and it needs to be resolved. And, appropriately, Prime Minister (Stephen) Harper and other world leaders are giving it the highest priority."   Continued...