The default of Lehman Brothers bank shows communication at clearing houses could be improved, a report from a pan-EU market watchdog said on Monday.

The Committee of European Securities Regulators (CESR) said it may be months or even years before the full impact of the biggest bankruptcy in U.S. history is understood but some lessons may be learned in clearing, where trades are squared for settlement.

Although a U.S. bank, Lehman's crash rippled widely as it comprised 2,985 entities globally and the bank had a significant mortgage business in Britain.

CESR notes that communication prior to and during default events could be improved, as showed in the experience of Eurex Clearing, CESR said in its report. Eurex Clearing is part of Germany's Deutsche Boerse stock exchange.

Rival clearer LCH. Clearnet's default rules allowed it to handle the default smoothly but no significant issues have shown the need for further regulation in clearing in general, CESR said.

There are however challenges that exchanges, clearing houses and other market participants will need to address in order to ensure that markets continue to operate efficiently during times of stress, CESR said.

Relevant issues include the handling of unsettled transactions and the establishment of a central counterparty for standard liquid credit default swaps such as indices, CESR said.

The Group of Twenty (G20) industrialized and emerging market nations are forging a global response to applying lessons from the credit crunch that claimed Lehman as one of its biggest victims.

G20 leaders are set to reiterate the need for central clearing of CDS transactions when they meet in London on April 2 to make markets safer and obtain an electronic trail of exposures.

CESR notes that minor improvements could be made regarding the risk run by a market member when they introduce orders on behalf of their client without any collateral, as the experience of Iberclear has shown, the watchdog said referring to the Spanish clearing house.

(Reporting by Huw Jones; editing by Simon Jessop)