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The turmoil that froze a part of Canada's asset-backed commercial paper market is not a black eye for this country's financial system, Finance Minister Jim Flaherty suggested yesterday.

"I can tell you what I've been hearing internationally is some envy of the fact that we have a Montreal accord working to create some time for informed valuations to be accomplished," Mr. Flaherty said in an interview yesterday following a meeting with the chief executive officers of Canada's biggest banks in downtown Toronto. "That is not happening everywhere. In fact it's a unique process in Montreal. That's to Canada's credit."

The Montreal proposal, which was originally spearheaded by the Caisse de dépôt et placement du Québec, is a preliminary plan designed to buy time and eventually restructure Canada's $35-billion market for asset-backed commercial paper (ABCP) that is not sponsored by the banks.

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Institutions that have signed the proposal have agreed to a 60-day freeze on trying to get money out of the trusts, as well as from asking for money from lenders. The second part of the plan is to convert the paper into longer-term debt instruments.

Other countries, including the United States, have also experienced trouble in their ABCP markets. But the non-bank portion of Canada's market is now frozen as a result of a loophole in the Canadian deals that allowed many banks to refuse emergency funding when the paper needed it in August.

Investors in other countries had not accepted that loophole, and their markets continue to trade, although the paper has lost value.

"I'm confident that a lot of work is being done," Mr. Flaherty said of the restructuring process in the Canadian non-bank ABCP market.

He just spent two days in New York meeting with bankers and others in the financial community.

He said credit-rating agencies have requested a meeting with him. "I will be meeting with them over time.

"There's been some discussion in the G7 about having a look at the role of rating agencies internationally," Mr. Flaherty said. The G7 finance ministers are meeting in October and he's expecting lively discussions.

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Credit-rating agencies have come under fire for their role in supporting securities that are related to subprime mortgages from the United States. Those securities were at the heart of last month's market turmoil.

In Canada, Canadian rating agency DBRS was the only one to rate securities with that loophole, which resulted in the breakdown of the non-bank ABCP market in this country.

"One of the concerns that is repeatedly expressed is transparency," Mr. Flaherty said of the current market situation. "The ability for investors to see what they're buying, and to [be able to]assess the risk on an informed basis. That's certainly one of the issues that's going to be in the forefront of discussions and reviews as the months go on."

Yesterday's meeting between the minister and the CEOs of this country's largest banks was a routine gathering, those attending it said.

One meeting, on the topic of ABM fees, garnered headlines across the country in March. But a few others have gone unnoticed, including one earlier this summer.

"Since I've been Minister of Finance, the past 19 months or so, we've met fairly regularly," Mr. Flaherty said. "It's an opportunity for me to listen to the bank CEOs on issues that concern them. The timing of this meeting was actually quite helpful because we're in the middle of a change in credit markets, and it gave me an opportunity to hear their views on that."

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"I think [Mr. Flaherty]s pretty comfortable with the Canadian system, as are we," said Royal Bank of Canada CEO Gord Nixon.

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