Highlights: G7 meets in Canada's Far North

IQALUIT, Canada (Reuters) - Following are comments by finance ministers and other officials after a meeting of the Group of Seven industrialized nations, focused on the euro zone's budget crisis, bank regulation and economic recovery.

JAPANESE FINANCE MINISTER NAOTO KAN

ON JAPAN'S FINANCES

"I explained Japan's fiscal situation to the G7 and frankly expected more discussion about it but much time was spent exchanging views on Greece. So as a result, there was no talk about Japan's fiscal deficit."

ON BANK REGULATION

"When considering what caused problems such as the Lehman shock and subprime woes, I can understand the view there needs to be certain restrictions against very speculative bank activity. But I also told the G7 that we need to take into account differences in each country's situation and how it has dealt with the matter.

"I also pointed out what I felt was a more fundamental problem behind this issue. With influence shifting more toward monetary policy from fiscal policy, we are increasingly seeing policies that create excessive liquidity. This has been the case for the last 10 or even 20 years ... Problems with bank activity have occurred amid this excess liquidity, so I've been saying that we may need to consider curbing excess liquidity."

"I think I was able to convey (Japan's) hope that a cautious approach is needed in any changes made to bank system regulations."

ALISTAIR DARLING, BRITAIN'S FINANCE MINISTER

ON URGENCY OF REFORM

"We don't have 10 years, we have two years. We need to get on with it."

STIMULUS AND EXIT STRATEGIES

"We are completely united in the necessity of maintaining the fiscal stimulus steps that were put in place until recovery was established."

"We are confident that we are seeing signs of recovery right across the world but we're right to be cautious because we've come through one of our biggest downturns that we've seen in generations. To remove support prematurely, as the IMF has said, would be to risk derailing that recovery. I was very pleased that people were completely united in sticking to the course that we'd set."

FINANCIAL REFORM

"On regulatory reform and the banking system we were very clear that we need to continue to work together on this. Of course, different countries have different systems and to some extent the recent U.S. proposals have reflected that ..."

"We discussed in the longer term whether or not it was appropriate to have a levy on the banking industry to reflect the costs that have been imposed as a result of what's happened. Its early days ... It's something that we need to work together on."

WILL 2012 TARGET FOR NEW BANK CAPITAL STANDARDS BE MET?

"It will, providing we maintain the political determination to do so. It was encouraging that the seven finance ministers and central bank governors today agreed that was absolutely necessary. We've got to make sure that the whole of the G20 remains as committed as it was .... The Basel reform process took 10 years. We don't have 10 years, we've got two years and we've got to get on with it."

EURO ZONE DEBT

"The best reassurance that you can give to anyone is that countries individually do whatever they need to do in the time scale they need to achieve their plans. But that we understand that collectively its in all our interests that all countries return to good economic health as early as they can."

BANK OF CANADA GOVERNOR MARK CARNEY:

ON FINANCIAL REFORM:

"I'm very pleased at the degree of consensus and resolve that was expressed around the table."

"One of the key objectives of this meeting was to improve the understanding of these various proposals and how the various people around the table felt those proposals might apply to others, or not. How country-specific were proposals that were not at the core of the G20 agenda ... I would say it was a great success in doing that because the point of having a frank and open discussion was to ask (that) question of people and say 'what do you see as necessary to be commonly agreed and what do you see as being unique to your circumstances?'"

"I took personally great comfort at what I heard around the table ... about proposals ... if they were supplemental to the G20 they were viewed as country-specific."

"The judgment has to be made whether some proposals can remain country-specific or whether they could create some form of arbitrage opportunities and I would say again, at least at this stage, that we're comfortable that that is not the case with what is on the table."

"That is one of the issues with (a levy). It would need to be more commonly agreed, if there were one, in order to avoid such an issue. But that's a ways down the road."

MULTI-SPEED RECOVERY

"We had a synchronized recession but now we're coming out of it at various speeds and various degrees of strength. We expect that U.S. growth will not be as robust as it was historically. That has obvious implications for Canada."

"In the monetary policy horizon, we have a shift in growth that provides a base of support for our terms of trade. We're still at a stage though where the uncertainty around global growth is still elevated."

"Of course we have to take all of this into account and set policy appropriately."

FRENCH ECONOMY MINISTER CHRISTINE LAGARDE

ON BANK LEVY

"We were all in agreement that it had to be a universal taxation or universal levy or instrument to avoid the risk of arbitrage."

ON OBAMA PROPOSAL ON LIMITING BANK SIZE AND ACTIVITIES

"We discussed a little bit the issue of proprietary trading, but we find it could be quite difficult to actually identify what is proprietary trading as opposed to what is simply operating in the best interest of banks' clients -- in relation to hedging for instance. We did not make any collective decision that that is what we wanted to do, because we also recognized that there were U.S. specific issues that were none of the French-specific, or German-specific issues or Japan-specific issues. So we understand where he is coming from, and what he wants to do, but it is not something that we would want to enforce and we all recognized that some aspects were perfectly U.S. specific."

ON BANK CAPITAL

"We also had a good discussion on bank capital, there was broad consensus there should be more, there should be better and loss absorbing capital."

"When you go into the technicalities of it, we all agreed that it should be organized in such a way it would not slow down or prevent the recovery that is under way. There is a timing element about it depending on the level of recovery and the pace of growth in countries."

"The FSB is going to come back to us by June at the latest with an impact study, in other words, if we increase banks' capital what effect will it have on the overall economy and will banks continue to finance the economy as we ask them to do or not?"

G7, G20 AND CURRENCY TALKS

"I am not sure that the G20 is currently the right forum to discuss currencies, which is one of the reasons why we think the G7 is a good forum to keep even in the renewed format. The G7 is a necessary forum to have and it is one where we can discuss currencies of the countries that are present at the table and others, who either contribute to volatility or stability."

ON GREECE

"The message clearly was that the European members of the G7 have confirmed to the other partners in the G7 the substance and significance of the plan put together by Greece and their confidence that it will be managed. And that we, the European members of the G7 will, in fact, make sure that it is managed."

"We will monitor and make sure it (the Greek plan) is managed."

ON STICKING TO ISTANBUL G7 STATEMENT ON CURRENCIES

"At this point in time yes. We always complain about the dollar not being strong enough. That is clearly an improvement." Keywords: G7/

U.S. TREASURY SECRETARY TIMOTHY GEITHNER

ON FINANCIAL REFORM

"We all share a deep commitment to try to move forward and reach agreement on a strong, comprehensive set of financial reforms on the timetable we all committed to last September."

"That means agreement on the details for example of a new set of capital requirements for large financial institutions by the end of this year. The United States is very committed to making sure we are working in putting in place a strong, multilateral level playing field across these global institutions and across global markets."

"And we're going to design this framework with great care and we're going to make sure as we put it in place, we're going to do so in ways that don't undermine prospects for recovery."

"Now we all have somewhat different systems, and these common standards we put in place are going to have to be complimented by slightly different approaches at the national level. But I think what we saw today was not a divergence in approach but a strong commitment together to try and make sure we're putting in place the strong reforms that would prevent these kind of crises from happening again."

ON EURO ZONE DEBT WORRIES

"European authorities gave us a very comprehensive review of the program now in place to address the challenges faced by the Greek economy. They made clear to us they will manage this with great care."

GERMAN FINANCE MINISTER WOLFGANG SCHAEUBLE

ABOUT GREECE

"Our partners outside Europe have the firm impression that the Europeans can solve this problem and can cope with it."

ON REGULATION AND BANK-FINANCING OF CRISIS-COSTS:

"It was generally agreed that the banks will have to pay for crisis costs"

"The goal must be to find regulations for the whole financial sector without possibilities to escape."

"The main goal is to find a common solution. That is the most important. If we succeed in this on a worldwide level - good. If not we must find coordinated steps in the EU."

ON NEW ROLE OF G7

"Open speech, not working out communiques, that is the meaning of the new G7."

CANADIAN FINANCE MINISTER JIM FLAHERTY

ON BANK REFORM

"With respect to financial reform, obviously that was a major issue of discussions. We discussed capital adequacy. We've agreed and committed to working closely together to ensure, among other things, that to the extent (a) financial crisis is caused by financial institutions that the financial institutions bear the costs of their contributions to those crises."

"We agreed on the timetable which was established before, asking the IMF to report back to us in April."

ON THE RECOVERY

"The global economic situation has improved and is improving. We do not have a firmly established recovery yet, but there are signs. We need to continue to deliver the stimulus to which we are committed and begin to look ahead to exit strategies and to move to a more sustainable fiscal track."

HAITI

"We had discussions concerning Haiti ... We are committed in the G7 to the forgiveness of debt vis-a-vis Haiti ... We discussed the long-term reconstruction assistance that will be needed."

G7

"We had a very good fireside chat on that subject. Our meeting has reaffirmed the proven role of the G7 as a first responder and as a sounding board for common challenges ... We look forward to our next meeting on the margins of the usual spring meeting of the IMF."

JEAN-CLAUDE JUNCKER, CHAIR OF THE EUROGROUP OF EURO ZONE

FINANCE MINISTERS

ON CURRENCIES:

"We have agreed that there is no reason to change what we said recently. We stick to what we said in Istanbul."

ON EURO ZONE FISCAL PROBLEMS:

"We, the representatives of the euro area, have made it clear that the situation in Greece is serious, and that the problem will be resolved."

(Reporting by Reuters team at the G7 meeting; editing by Chizu Nomiyama and Jeffrey Hodgson)