October 13, 2008 / 1:13 PM / in 9 years

Canada ready to act to protect financial system

OTTAWA (Reuters) - Canada will take “whatever steps are necessary” to ensure its financial system is not harmed by measures other nations are taking to deal with the global crisis, Finance Minister Jim Flaherty said on Monday.

“We will never allow our financial system, which has been ranked as the soundest in the world, to be put at risk by global events,” he said in a statement.

“The government stands ready to take appropriate action to avoid unintended consequences from policy measures by other countries that would put wholesale borrowing in Canada at a competitive disadvantage.”

The fear in Canada is that if other countries take steps to bolster their financial systems -- such as blanket guarantees of deposits -- and Canada does not follow up with similar action, then funds could be withdrawn from Canadian banks and placed in jurisdictions with more guarantees.

The Bank of Canada pledged on Monday to continue to pump cash into money markets as long as warranted.

“Consistent with the G7 action plan, the Bank of Canada will continue to provide exceptional liquidity to the Canadian financial system as long as conditions warrant,” it said.

The announcements came as governments across the world unveiled multi-billion dollar bank bailouts to restore confidence in the face of the worst financial crisis in nearly 80 years.

Canada and other Group of Seven nations had agreed on an action plan at a weekend meeting in Washington.

Reporting by David Ljunggren and Louise Egan, Editing by Chizu Nomiyama

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