The bank merger issue was once again front and centre at the RBC Capital Markets Canadian Financial Services CEO Conference this morning.

Today, the heads of National Bank, TD Bank and Bank of Nova Scotia agreed that bank mergers should be allowed, but that the banks need clarity from the government on just how the approval process will operate. The trio suggested they were encouraged by the new finance minister, Ralph Goodale’s, pledge to clarify the process by June 30.

TD Bank’s Ed Clark indicated that he sympathizes with the federal government’s dilemma in insisting on approval power over possible bank mergers, without wanting to micro-manage the process. He said industry and government need to come up with a workable solution to the problem.

Concerning his own bank’s recent merger dance with E*Trade Financial, Clark declared the deal dead. Some market watchers had speculated that the deal between TD Waterhouse and E*Trade could be revived, but Clark dismissed that suggestion. He confirmed that the deal fell apart over corporate governance issues, not the value of the deal. He added that he came out of the negotiations feeling good about Waterhouse’s present position and strategy.

He said that it isn’t fair to Waterhouse employees to drag out the dalliance with E*Trade, and that TD must rededicate itself to growing the business.

On that count, Clark said that Waterhouse is poised to grow. However, he doesn’t expect much growth from day traders. “They tend to blow themselves up, and are replenished by other people with dreams,” he joked.

Instead, he sees the growth from former full-service broker clients that are orphaned by the bank-owned dealers segmenting their client bases and sloughing off lower-end clients. There are hundreds of thousands of these refugees being created every year, Clark said. And, these clients either end up at independent advisors (which TD plays through its carrying broker business), or with discounters such as Waterhouse.

For his part, Bank of Nova Scotia CEO, Rick Waugh, suggested that his firm is focused on growing the full service business. He indicated that Scotiabank currently has 850 full-service brokers, and it hopes to reach 1,200 within three years.