* Cunliffe: mutual trust key to effective global rules
* Jenkins: go it alone if global rules insufficient
* EU official says U.S. faces test over clearing houses
LONDON, March 17 (Reuters) - The world's biggest banks still could not be dismantled safely, more than five years after the collapse of Lehman Brothers, the Bank of England's deputy governor for financial stability said on Monday.
International standard setters have made progress in reforming banking rules since Lehman went under in September 2008, Jon Cunliffe, the deputy governor, told a Chatham House financial conference. But the core task of ending too-big-to-fail banks remains, he said.
He urged the European Parliament to approve a new European Union law that would give national regulators the powers to wind down ailing banks.
"I do not think we can say with confidence now that we could resolve a failing global giant," said Cunliffe, Britain's former ambassador to the EU in Brussels.
Heads of the G20, the world's leading 20 economies, will meet in Brisbane, Australia in November. Agreeing new rules to end too-big-to-fail banks was perhaps the most important regulatory priority for the summit, Cunliffe said.
The success of those reforms will hinge on applying them consistently worldwide and on mutual trust among financial supervisors to avoid unintended consequences, he said.
U.S. LITMUS TEST LOOMS
The EU has expressed alarm that the United States is forcing offshoots of foreign banks to hold capital there, to keep U.S. taxpayers off the hook if a foreign lender goes bust, even as Europe introduces reforms to reduce the chances that might happen. Cunliffe echoed the European concern.
"Regulators and supervisors who cannot trust the implementation of standards in other jurisdictions will defend stability in their own jurisdictions by raising barriers," he said. "Such action minimises the risk of international crises, but the cost is the rolling back of financial globalisation with less effective and efficient intermediation on global savings."
Without mutual trust there is a risk of more crises and fragmentation in global markets, Cunliffe said.
The International Monetary Fund and the G20's Financial Stability Board, chaired by BoE Governor Mark Carney, can play key roles in establishing mutual trust, he said.
Robert Jenkins, a former member of the BoE's Financial Policy Committee, which sets the tone for UK regulation, said a global standard is desirable if it is sufficient to the task.
"But if the agreed global standard is insufficient, then national authorities not only might but should deviate in order to protect their taxpayers," Jenkins told Reuters. The U.S. initiative bolsters a global set of bank capital rules known as Basel III, which Jenkins said are insufficient.
EU-U.S. spats have also surfaced over new rules to regulate financial derivatives.
"The litmus test will be the U.S. Commodity Futures Trading Commission's forthcoming rules on foreign clearing-house recognition," Patrick Pearson, a senior official at the European Union's executive European Commission, told Reuters.
"To that extent we will learn if they willing to mutually recognise clearing houses from other jurisdictions," he said. "The jury is still out."
Lack of trust among regulators is also making it hard to knit together data from derivatives-reporting venues worldwide, a participant at the conference said. That means there is still no single snapshot of risks in the $700 trillion market.
Rachel Lomax, a former BoE deputy governor, told Reuters that as long as regulators are under domestic political pressure to crack down on bankers' bonuses, misconduct and other issues, they will find it hard to develop mutual trust with their foreign counterparts.