The CEOs of Canada’s big five banks expressed a range of opinions about the state of the economy and financial markets at an industry conference being held today in Toronto, but all are confident of their firm’s ability to weather the storm.

So far, the credit crunch has been characterized by widening credit spreads and higher risk premiums in response to tumbling U.S. housing markets, and massive writedowns of impaired assets. Some analysts believe that the writedowns are largely over, and that markets are now recalibrating to the new cost of credit. The big question is how long does it take for this adjustment to take place, and what is the impact of costlier credit on banks’ earning power, and the economy.

Speaking at the conference being hosted b Scotia Capital, TD Bank’s CEO, Ed Clark, came across the most pessimistic of the bunch on the state of financial markets. He indicated that he was nervous that, despite what others may feel, we haven’t traversed the crisis yet. He indicated that the deleveraging that’s underway throughout the world financial system is unlikely to occur without further stumbles. “Do I believe that we can refinance the whole financial services industry, to the extent we have, without strains and stresses? I don’t believe we can,” Clark said.

Clark warned the world’s central bankers from becoming complacent about the state of markets. He said that the U.S. government bailout of lending giants Fannie Mae and Freddie Mac was a good thing, and had to be done, but that doesn’t mean it will be smooth sailing from here.

“I would caution the central bank governors: don’t declare victory here. I think there’s still lots of room for accidents,” he added. Clark said that the market readjustment will raise the cost of funding for banks in the long-term, that will impact the availability of credit, which flows into the real economy, hampering growth.

“All I’m saying is: stay nervous,” Clark said. “To declare victory just because we saved Fannie Mae and Freddie Mac seems like a little bit of euphoria. So I think that everyone should stay vigilant because we are restructuring the financial services industry in the next two or three years.”

Some of the other bank chiefs were a bit more sanguine about the state of the markets and the economy. Bank of Montreal’s Bill Downe suggested that we are likely in the sixth or seventh inning of the credit crunch, although he expects it to spillover into 2009. Moreover, he noted that banks are managing to pass some of the increased costs through to clients.

CIBC’s Gerry McCaughey indicated that some, but not all, of the bank’s higher funding costs can be passed on to clients, and this likely lowers their growth potential. That said, McCaughey also noted that the deleveraging should be less extreme in Canada than elsewhere. And, he said that over time changes in both pricing and spreads should mitigate the higher cost of capital banks are facing.

One thing the bank CEOs all agreed on was that they are well positioned to deliver results in the new market environment. However, most of them also don’t see acquisitions as a big part of the picture amid the current climate.

RBC’s CEO, Gord Nixon, sloughed off the notion of a domestic bank merger or a bank-insurance company deal, particularly with a federal election underway. He also expressed caution about any possible deal for his bank in the U.S.

TD’s Clark said that it is likely not looking for any major acquisitions, but may do a small fill-in deal. For now, it is content to grow organically in the U.S., which has better rates of return than an acquisition, Clark said.