MONTREAL (Reuters) – Bank of Canada Governor Mark Carney urged the Group of 20 developed and emerging economies yesterday to push ahead quickly with "radical" financial reforms but signalled flexibility on when new global banking rules would be phased in.

The world's policymakers and regulators are working on a package of new global rules for bank capital and leverage aimed at minimising fallout from future financial crises.

Carney, who delivered his speech at conference of the International Organisation of Securities Commissions (IOSCO) in Montreal, downplayed fears the reforms would slow down the global recovery, even though he said they were "radical, not incremental".

Speaking later at a media briefing, he said it was too early to gauge how recent euro zone concerns will further impact Canada's economy and gave few clues on the bank's monetary policy going forward.

"There's been a modest impact on financial conditions. There's been a slight tightening of conditions in Canada because of this. There's been a modest impact on commodity prices. But, it's not over," he told reporters after his speech.

"We are pleased with the measures and encouraged by the measures that European policy makers have taken, but I don't think anybody is of the view that more will not be required," he added.

The Bank of Canada raised its key interest rate on June 1, the first G7 industrialised economy to do so after the global recession, but warned at that time that the European debt crisis made its next move highly unpredictable. The central bank's next rate announcement is on July 20.

"It sounds like the urgency of the risks posed by the European situation has eased somewhat in the Bank of Canada's mind. Other things equal, this modestly raises the odds of a follow-up rate hike on July 20," BMO Capital Markets wrote in a research note to clients following Carney's press conference.

The Canadian dollar showed little reaction to Carney. But yields on overnight index swaps, which trade based on expectations for the Bank of Canada's key policy rate, edged higher, showing the market saw tightening as slightly more likely in July than before Carney spoke.

Still, much of Carney's focus hinged on a rapid G20 accord, given the urgency created by the European debt crisis and the need to reduce market uncertainty.

"The time for debate and discussion is drawing to a close. Policymakers now need to decide and to implement," Carney told the conference.

The G20 group of systemically important emerging and advanced industrialised nations reaffirmed on Saturday a November deadline to agree on those changes, but much work remains to be done to hammer out the final details.

"If we can move faster, we will," Carney said.

The agreed deadline for implementing these so-called Basel III rules is the end of 2012, though some European nations would like to see this delayed because they fear it could place additional stress on their already troubled banks.

Carney said the aim was implementation by the end of 2012, but suggested there would be flexibility.

"The transition timetable and grandfathering can be expected to be enlightened. The expressed intent of G-20 policymakers is to get the measures right and then to phase them in as financial conditions improve and economic recovery is assured," he said.

"We should not sacrifice our ambition for these measures to speed of implementation, nor the economic recovery to an arbitrary timeline."

Canada will host a meeting of G20 leaders on June 26-27 in Toronto.

The United States and the European Union are trying to overhaul their financial systems wracked by the 2008 credit crisis. Both economies are trying to write rules to ensure that large troubled financial firms are allowed to fail rather than propped up by the government such as what happened with a number of Wall Street firms.

But they differ on how to further safeguard the financial system and whether to clamp down on banks' speculative activities. US lawmakers are considering whether to include a provision championed by former Federal Reserve Chairman Paul Volcker to prohibit banks' proprietary trades and get banks out of hedge fund and private equity business.

But Carney said that was not on the cards for Canada.

"The question is how will it actually be implemented in the United States. Canadian officials are not contemplating a similar restriction on business activities. We think that a more effective way to get the risk-reward right is to get the capital rules right," he said.