Finance Minister John Manley is refusing to say whether the federal government threw up roadblocks to end talks on a merger between the Bank of Nova Scotia and Bank of Montreal.

The Globe and Mail reported Tuesday that the Prime Minister's Office pulled the plug on the planned merger, a deal that had been in the works since the summer. The plan was derailed just before Thanksgiving, the paper said, when the PMO signalled the proposal was too explosive to consider.

Manley refused to comment on the report Tuesday but told reporters that any banks that want to merge will be subject to Ottawa's review process.

"I would never comment on any discussions I had with anyone," Manley said following the federal cabinet meeting in Ottawa.

"If somebody wishes to make a proposal, it will become public because they will have to go through a public process."

The Globe quoted sources close to the talks, who say the two banks had been flirting with a merger for about three years. The sources say the talks turned serious over the summer, after Manley took over as finance minister.

The Globe says senior executives at Scotiabank initiated talks with the BMO after Manley said he might be receptive to such a merger.

"From Manley there was a sense that it was doable. Up until then the message from Ottawa was that a bank merger was taboo," one person familiar with the discussions told The Globe.

Bank mergers have been on hold since 1998, when then-finance minister Paul Martin blocked two planned mergers.

Last week, Manley instructed two parliamentary committees to clarify sections of federal bank merger guidelines. Some Bay Street analysts interpreted the move to mean that Ottawa was about to relax its opposition to bank mergers.

Sources told the paper Manley felt a merger would help Canada's financial sector compete with more powerful international players. But it appears the PMO put an abrupt to end to any merger talks.

"The Prime Minister's Office said no, and that ended it," one person involved in the discussions told The Globe.

All parties reported to be involved in the merger talks are remaining tight-lipped. A spokeswoman for the PMO refused to comment and Manley's assistant said he could not confirm or deny the reports.

"As far as I know it's speculation, and I can't comment beyond that. We do not comment on market rumour or speculation," Pamela Agnew, a spokeswoman for Scotiabank, said.