Nov. 4 (Bloomberg) -- Canadian Finance Minister Jim Flaherty said Group of 20 governments are divided as they try to craft new regulations aimed at ensuring banks pose less of a threat to their economies.

As G-20 finance ministers and central bankers prepare to meet Nov. 6-7 in St. Andrews, Scotland, Flaherty told reporters in Ottawa today that there are “disparate views” internationally on how to address the size of financial firms, the so-called too-big-to-fail problem.

“We need to be comprehensive in our approach,” Flaherty said. “So we need to talk not only about larger institutions, but also some of the smaller institutions, and make sure that we’re not creating two-tiered involvement by government.”

Differing opinions on what to do, which Flaherty didn’t elaborate on, demonstrate how G-20 members may struggle to coordinate policies as the strengthening economic recovery reduces the need for them to act in unison as they did in battling the worst financial crisis since the Great Depression. The French government today complained that some G-20 nations are not doing enough to curb banker pay.

G-20 finance chiefs including Flaherty and U.S. Treasury Secretary Timothy Geithner convene in Scotland in two days after a year in which a global recession forced them to provide more than $1 trillion in joint stimulus and craft a plan to revamp banking rules.

Differences Within Countries

As they turn to ensuring the next expansion is less crisis- prone, differences are emerging -- even within countries -- on what to do with banks. Bank of England Governor Mervyn King and U.K. Chancellor of the Exchequer Alistair Darling disagree over whether to separate investment banks from operations that take deposits from consumers and manage payment systems.

In Canada, banking regulator Julie Dickson said last month that designing financial regulation to identify “systemically important” institutions may generate “unintended consequences” that could undermine the industry.

Global regulators have no single “silver bullet” to reduce the damage large banks can cause to the financial system if they fail, policy makers said in London yesterday. Financial Services Authority Chairman Adair Turner and Philipp Hildebrand, the vice-chairman of the Swiss National Bank’s governing board, said that a banking group’s structure will determine what reforms are applied, such as holding greater amounts of capital.

Banker Pay

France is concerned that some countries are failing to implement international guidelines on banker pay that G-20 leaders agreed to in September, an official told reporters today on condition of anonymity. The U.S. and U.K. are among the countries that have begun consultations with banks, yet not acted on the guidelines, the official said.

At a September summit in Pittsburgh, G-20 leaders agreed to adopt compensation guidelines for banks and other financial companies in a bid to rein in risks by aligning rewards with long-term success. The principles encourage companies to defer bonuses for senior executives and other key employees, and permit pay to be clawed back if losses occur later.

A Bloomberg opinion poll last month showed almost three in five traders, analysts and fund managers believe their 2009 bonuses will either increase or won’t change. Only one in four saw a decline.

One reform proposal that is gaining traction within the G- 20 is the “living will” approach that would force institutions to pre-arrange wind-up plans, a Canadian official told reporters today, also on condition he not be identified. A U.K. official said today that the G-20 will seek an agreement for next year.

International Monetary Fund Managing Director Dominique Strauss-Kahn said in an interview late yesterday that he also expects the G-20 to adopt a timetable and plan to ensure the next global economic expansion is more balanced.

To contact the reporters on this story: Alexandre Deslongchamps in Ottawa at adeslongcham@bloomberg.net; Simon Kennedy in St. Andrews at at skennedy4@bloomberg.net.

Last Updated: November 4, 2009 12:20 EST