UPDATE 1-Europe must fix its banks to ensure recovery-Canada

* Europe needs bank repair, fiscal consolidation

* No consensus on bank tax, but other reforms on track

* Implementation of new capital rules possibly delayed

By Louise Egan

BUSAN, South Korea, June 4 (Reuters) - Europe needs to fix its banks and some countries must take bold action to close their budget gaps to prevent the global recovery from derailing, Canadian Finance Minister Jim Flaherty said on Friday.

Flaherty said concerns about the European debt crisis had dominated conversations among policy makers from the G20 leading developing and developed countries even before they began formal meetings in the South Korean port city of Busan.

"The economic recovery globally is fragile. The events in Europe are of concern," he told reporters.

"It is essential to ensure continued recovery that Europe fix its banks. It is essential that certain vulnerable European nations follow through with major fiscal consolidation, and get the job done," he said.

Flaherty, the most vocal G20 opponent of a proposed global bank tax, discussed financial reform with counterparts in China and India in the days prior to the Korea gathering.

When asked about a media report that momentum was growing in favour of imposing a levy on banks to ensure taxpayers do not bear the cost of future bank failure, he replied: "I don't see any evidence of that. In fact, the evidence I see is to the contrary ... On bank levies, there is no consensus."

Canada's mantra to the G20 has been to focus on the so-called core financial reforms on the quantity and quality of bank capital and caps on leverage. The G20 leaders have pledged to agree on new capital standards by the end of this year, a goal the minister said looked achievable.

"If we get some more work accomplished here this weekend, then I would expect the leaders in Toronto would be able to express with assurance that we're going in the right direction, that we're on time ... to have the agreement in place by the end of the year," he said.

However, the implementation of the new rules could be pushed to after the original 2012 date envisaged, he said. (Reporting by Louise Egan; Editing by Jonathan Thatcher)