UPDATE 2-TD Bank throws wrench into Canada ABCP repair

(Recasts with analyst comments, background)

By Nicole Mordant

VANCOUVER, British Columbia, Dec 17 (Reuters) - Toronto-Dominion Bank (TD.TO), Canada's second biggest bank, has thrown a wrench into the drawn-out and complicated repair job being done on a broken-down corner of the country's debt market.

After a weekend of speculation, TD Bank said on Monday it is "willing to consider" steps that will help repair the third-party asset-backed commercial paper market but didn't believe it should shoulder a burden it didn't create.

"(Our) position has been that it would not be in the best interest of TD shareholders to assume incremental risk for activities in which we were not involved," TD President and CEO Ed Clark said in a statement.

The largest investors in Canada's C$33 billion ($33 billion) of ABCP issued by groups other than the country's big banks are trying to hammer out a fix-it plan for the market, which ground to a halt in August when buyers panicked about possible links to the troubled U.S. subprime housing market.

The investor committee, headed by veteran lawyer Purdy Crawford, missed its deadline on Friday to announce details of a repair.

Instead it made an announcement on Saturday that was thin on details and asked investors to give the panel another six weeks to work on a solution.

The Globe and Mail newspaper reported over the weekend that the last big issue on the table was getting financial institutions to agree to backstop the longer-term notes that the commercial paper is being converted into in case of future defaults or margin calls.

The newspaper said the committee asked each of Canada's big five banks to pony up C$500 million but that TD refused because it has no exposure to the non-bank ABCP market. The paper said the top two officials at Canada's central bank had put some pressure on the banks to move talks along.

"This fairness resolution, in terms of how much everyone should put up, is going to be so difficult to put together because how do you determine how involved the bank was," said Daryl Ching, founder of Clarity Financial Strategy, a company set up to advise investors on the ABCP debacle.

"I think this is going to be the largest hurdle when it comes to getting the banks to provide liquidity," he said.

A source at one of Canada's big banks said it shouldn't matter how involved the lenders are in the ABCP market because a failure to fix the market will hurt all the banks.

"If this thing unwinds, the thinking is that everyone is going to be on the line," the source said.

Pressure from the Bank of Canada should get the country's big banks on board, said Edward Devlin, Canadian portfolio manager at Pacific Investment Management Co, the world's largest bond investor.

Another problem was getting all the international banks involved in the market to sign up to a deal, Devlin said although he believed this hurdle too could be overcome.

So far, the committee has the support of Deutsche Bank AG (DBKGn.DE), according to the Globe and Mail, a major market player but by far not the only one.

"Eventually, none of them will want to stand out as the person who stood in the way of progress," Devlin said.

($1=$1.00 Canadian) (Reporting by Nicole Mordant; Editing by Rob Wilson)