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OTTAWA (Reuters) - Finance Minister Jim Flaherty said on Thursday that Ottawa favors using the Financial Stability Forum and International Monetary Fund to oversee international bank regulation rather than creating a new watchdog for that role.
"In the middle of an economic crisis, synchronized global recession, a crisis in some of the financial systems of the world, this is not the time to create new global entities, which would take months to get up and running, if not years," Flaherty told reporters.
Flaherty, who will fly to Rome later on Thursday for a meeting of finance minister from the Group of Seven leading industrialized nations, repeated his call for so-called toxic assets to be cleared out of the world financial system.
"Government is the only source now of going in and dealing with these bad assets in the banks and segregating them ... Every country has to get its own financial system in order and its institutions in order and then we have to have some sort of verification," he later told the Canadian Broadcasting Corp.
"Our suggestion ... has been to use the IMF since they're already in that business and have experience, and we need that quickly," he said.
Flaherty later told CTV television that the G7 meeting in Rome could "start making some decisive steps that the G20 can follow from", but gave few details.
"Our G20 agreement was that all of us would create initiatives in our own jurisdictions," he told reporters, referring to November's G20 summit in Washington.
The finance minister also said the Washington's planned stimulus package would benefit Canada as well as the United States. Canada sends 75 percent of its exports to the United States and is being badly hurt by the slowdown there.
"The American plan ... is a strong package and good for the United States, good for Canada. We know that stimulus builds on stimulus."
Flaherty told CTV that he saw more trouble ahead for the country's largest trading partner.
"The United States economy certainly hasn't hit bottom yet. Their housing recession continues unabated, downward. So we're in difficult times. I'm optimistic about 2010," he said.
He also voiced appreciation for renewed support in Parliament from the Liberal Party for the minority Conservative government's budget measures. Flaherty told the CBC he hoped the budget would receive final approval in early March.
Flaherty told CTV that Canada's banking system was stable and that the country had been helped by a decade of running budget surpluses.
"We have lots of room to maneuver at a time of crisis ... so we don't have to create permanent deficits," he said.
"The Americans, the British have a lot of trouble because they've been running deficits and when you hit rough waters like this and you start really spending a lot of money it's going to be hard for them to come out of it," he said.
On a separate issue, Flaherty said it was important that the IMF have enough resources, and he expected to discuss the issue with G7 ministers and with IMF Managing Director Dominique Strauss-Kahn.
"The demands on the IMF are substantial now, particularly by some of the economies in Central and Eastern Europe, and some of the emerging economies, which are experiencing a flight of financial institutions, of foreign banks and so on."
Reporting by Randall Palmer and David Ljunggren