National Bank of Canada says it will acquire all of the asset-backed commercial paper (ABCP) held by National Bank Mutual Funds, against payment in cash, subject to regulatory approvals.

As a result, unitholders can be reassured that the funds will not hold any ABCP until National Bank is convinced of the quality and liquidity of the paper, whether or not it is issued by a major bank.

“Thanks to the bank’s good financial position, we have the opportunity to voluntarily take these extraordinary measures to maintain the relationship of confidence that we have with our clients,” says Louis Vachon, president and CEP of National Bank.

These measures build upon the agreement reached last Thursday in Montreal among a number of major players in Canada’s financial markets to establish normal operation in the Canadian third party ABCP market and to work out a solution to the liquidity problem affecting these vehicles.

As a result of these initiatives, the National Bank expects to acquire approximately $2 billion in ABCP including approximately $150 million in bank conduits ABCP. The Bank also currently owns less than $100 million in bank conduits ABCP.

In the fourth quarter, the National Bank will assess the value of the ABCP acquired as well as other contingencies related to its exposure to ABCP. National Bank does not provide liquidity facilities to any structured asset backed commercial paper conduits, nor to any conduits administered by any other bank. As of July 31, 2007, National Bank had reduced its committed backstop liquidity facilities to its own asset-backed commercial paper conduit to $750 million.

These measures are subject to the receipt of the regulatory and other approvals, which, in the opinion of National Bank, National Bank Securities and their counsel, are required to implement the announced transaction.

The bank says these measures are being undertaken despite having no legal or contractual obligation to do so.

In a related announcement, National Bank said it would acquire all of the asset-backed commercial paper (ABCP) held by Altamira Mutual Funds, against payment in cash, subject to regulatory approvals.

The Altamira High-Interest CashPerformer accounts in Canadian dollars and the Altamira $U.S. High-Interest CashPerformer accounts are deposits made at National Bank of Canada and are not affected by the current market conditions.