LONDON, Dec 3 (Reuters) - International banks in Britain should resist pressure from European Union regulators to shift their non-EU business to new hubs in the bloc because of Brexit, Britain's markets watchdog said on Monday.
Around 30 lenders in Britain have applied to the European Central Bank for a license to open or expand EU bases to avoid getting cut off from European customers when Britain leaves the bloc next March.
"We are aware there is some pressure on firms to ensure a critical mass of business moves over to a European Union entity being created," Financial Conduct Authority Chief Executive Andrew Bailey told parliament.
UK regulators have written to banks to say they must ensure that any shift in non-EU business was in the interests of the client and not because of pressure from regulators to be more self-sufficient on the continent, Bailey said.
"We didn't do this to say nobody must leave the UK," Bailey told parliament's Treasury Select Committee.
Frankfurt, Paris, Amsterdam, Luxembourg and Dublin are all vying to attract financial firms from Britain that need continued, unfettered access to EU customers after Brexit.
But the ECB has warned it will only issue licenses if there are enough senior boots on the ground to oversee activities of "substance," rather than a "letterbox" or empty shell entity, with key decisions taken back in London.
These conditions are forcing banks to examine if they have enough business in the region to sustain two hubs.
"I would imagine that this issue will rumble on," Bailey said.
Banks were being told by regulators on the continent to "do what you have to do" to get a license for day one of Brexit next March, with further conversations on how the new entities will be fleshed out on "day two" or in coming years, Bailey said.
The Bank of England expects about 5,000 financial sector jobs to move out of Britain by next March, far lower than the hundreds of thousands that some studies were predicting.
Bailey noted the numbers for day one moves had come down hugely compared with initial predictions.
"But the caveat is that the day two discussions are about what does a sustainable business on the continent look like," Bailey said. (Reporting by Huw Jones; Editing by Mark Potter)