Canada's Flaherty says new bank powers prudent

Thu Nov 27, 2008 6:38pm EST
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By Lynne Olver

TORONTO (Reuters) - Canadian Finance Minister Jim Flaherty said on Thursday he does not expect to use proposed new powers to inject capital into domestic financial institutions, but added that it is best to be prepared for "improbable events."

"I do not anticipate having to use any of those powers but it's best that we have them," Flaherty told business news channel BNN on Thursday.

Earlier, he presented an economic and fiscal update in Ottawa that proposed various measures to support the country's financial system if needed.

Aside from the ability to inject funds into financial institutions, the government plans to expand the borrowing limit and scope of actions available to the Canada Deposit Insurance Corp.

The Canadian Bankers Association said it supported the moves.

"It is clear that the government is just updating its toolkit to give it similar authorities to what is available to other governments around the world," the banking industry group said in an emailed statement.

The head of a small-business group said that powers to help the Canadian banks were not needed.

"I believe we don't need to inject money into the banking system, Canadian banks make money in good times or bad," said Catherine Swift, president of the Canadian Federation of Independent Business. "They've got a license to print money, if you ask me."

(Reporting by Lynne Olver; Editing by Frank McGurty)