Banks agree to support each other; what of the rest?

News is out from several members of the Canadian banking fraternity that they’ve agreed to “work together” to ensure that their part of the asset-backed commercial paper market continues to function. Must be complicated to finesse this, as they are also some of the same insitutions that are on the hook (although some have allegedly refused to fund) for those “liquidity lines” at places like Coventree (COF:TSX):

“Although Coventree has issued notices to liquidity providers under each of the facilities referred to above for which the draw conditions have, in the opinion of Coventree, been satisfied, there is no assurance that the liquidity providers will fund or be obligated to fund under the requisite liquidity agreements. Certain liquidity providers have advanced funding, some have disagreed that they have an obligation to fund, some are in discussions with the Company and some have not responded. If liquidity is unavailable under the terms of the relevant facility or the liquidity providers do not fund as required under the relevant agreements, that could lead to a default by a conduit in respect of its issued and outstanding ABCP.” Coventree Aug 14-07 press release excerpt

One can only assume that they’ve taken these sections of the Competition Act into consideration, before agreeing to help their confreres but perhaps not – at least according to Coventree – the independent conduit providers:

The provisions 45, 46 and 48 of the Competition Act prohibit agreements between two or more persons to prevent or unduly lessen competition or to unreasonably enhance the price of a product. Agreements between competitors to fix prices, to allocate customers or geographic markets, or to restrict production of a product by setting quotas among competitors or other means are considered to be “hard-core” cartel activities, with no socially redeeming features. Anti-competitive agreements harm both consumers and businesses, and enforcing the conspiracy provisions is an important priority for the Bureau. Much of the Bureau’s work in this area involves investigating and prosecuting international cartels, which is a crucial activity for competition agencies around the world.

MRM