By Huw Jones

LONDON (Reuters) - The United States has largely cracked the problem of protecting taxpayers from the danger of having to bail out banks that are "too big to fail" while Europe lags behind, Bank of England Deputy Governor Paul Tucker said.

Allowing large banks to fail without the massive disruption seen when Lehman Brothers collapsed five years ago this week has been the ambition of policymakers after governments had to rescue many lenders in the 2007-09 financial crisis.

Such banks, believing governments cannot afford the harm to economies of letting them go under, are tempted to take bigger risks and unfairly benefit from cheaper funding as investors know taxpayers would always rescue them, policymakers have said.

"Were some of the biggest Wall Street firms to fail this week... I think it would be very hard for the President and U.S. Treasury Secretary to persuade the Congress to commit taxpayers' money," Tucker told a London School of Economics seminar on Tuesday.

This is because Congress has given the U.S. administration powers and instruments to wind down big financial firms, though it would not be smooth or without ripples, Tucker said.

"The capital structure of big firms is such that it could be done on a global basis, and I don't think I am alone in thinking that in the official sector," said Tucker, who steps down this autumn to become an academic in the United States.

"I think it could be done now under duress by the American authorities with the authorities elsewhere stepping aside. I don't think that is the position in Europe."

The European Union has yet to approve a law to give supervisors tools to break up and close failed banks.

Tucker, who chairs a working group on global coordination on winding down banks at the Financial Stability Board, said big lenders will need to reorganize themselves over the next few years to "make themselves more conducive" to using these tools.

Work by the FSB over the next year or two will reduce the ripples and mess from a banking failure even further, he said.

The Bank of England, which supervises banks in Britain, would be prepared to "step aside" and allow the United States to wind down a global bank that had operations in London, he said.

He took a swipe at industry lobbying on new rules, saying the banking sector could be more helpful in the process.

"It's hard to take seriously either the comments before the rule is fixed or the comments after the rule is fixed, which is pretty serious frankly given the depth of knowledge and help that we could get from the industry," Tucker said.

It was also "bananas" to go by hard rules alone and not judge by other criteria as well when checking whether a bank is safe.

"This is why we at the Bank of England are trying to pare back the reliance on rules and say, actually, we want sound banks run well with rather more criteria than that," he said.

The Bank of England will publish a paper on supervision based on such an approach, described as "constrained discretion" in the next few weeks, drawing on how the U.S. Federal Reserve has conducted stress tests of banks.

The new policy will have the potential to change the landscape over 10 to 15 years, Tucker said.

(Reporting by Huw Jones; Editing by Anthony Barker)