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* Banks planning for life after Brexit
* Transition deal may be too difficult politically
* Banks seek quick agreement on passporting
By Andrew MacAskill, Huw Jones and Anjuli Davies
LONDON, Nov 22 (Reuters) - Banking executives have welcomedhints that Prime Minister Theresa May will push for atransitional period to help them adjust to Britain's exit fromthe EU but they fear such a deal might not work in practice.
With banks planning for life after Britain leaves theEuropean Union, the executives said a transitional deal may betoo difficult politically because of opposition from euroscepticBritish lawmakers and the need for the remaining 27 EU nationsto pass legislation in their parliaments.
"It is going to be a really tough ask. I think thegovernment may find it difficult to get support," said oneexecutive, who has spoken to ministers. "It may not workpolitically."
The clock is already ticking as banks based in Londonfinalise plans to potentially shift some operations to otherEuropean countries so they can still serve EU customers. Somemay be tempted to move next year given the uncertain status ofany transitional deal and the time it would take to relocate.
As a cornerstone of any transitional arrangement, banks wantthe government to reach a quick deal to preserve passporting -which allows them to sell services and products freely acrossthe EU - for up to five years.
May pledged on Monday to address business concerns thatBritain could fall off a "cliff edge" - a sudden exit from theEU - in 2019, hinting at some form of transitional agreement.But that could be unpopular with those members of the public andher party who voted to leave the EU.
"There is a lot of fear among the more passionate Brexiteersabout the idea of a transitional arrangement," said anotherexecutive, who is lobbying the government for more time.
MISSION IMPRACTICAL?
John McFarlane, who chairs the lobby group TheCityUK as wellas Barclays, said May's comments were an appreciation of thefinancial sector's need for a deal and it now needs clarity onhow it will work.
"Therefore the question is: what is it and what does itapply to? It is not necessarily for everything," MacFarlane toldReuters.
Hardline supporters of Brexit oppose any bridgingarrangement, worried it would last for years and mean Britainwould still contribute to the EU's budget and remain subject tothe European Court of Justice.
But a transitional deal that did not involve some form ofextension of so-called Article 50 divorce talks, which May hassaid will start by the end of March and last two years, wouldnot offer enough legal certainty for banks.
"Transitional arrangements are more of a plea rather than ascheme available off the shelf and we don't know how it wouldwork," said Etay Katz, a lawyer at Allen & Overy who is advisingbanks on Brexit restructuring.
Pavlos Eleftheriadis, who teaches European law at OxfordUniversity, said any transitional deal involving services suchas banking will require a new treaty that must be ratified byall the remaining EU members.
"I am not saying it is impossible, but it is almost asdifficult to do a permanent deal," he said.
A European diplomat said some EU states are wary aboutgiving Britain a long period to adapt to life outside the bloc,fearing a lenient transitional arrangement could becomepermanent as final trading terms can take years to agree.
Belgium's Wallonia region last month held up a plannedEU-Canada free trade agreement, an indication of how achievingconsensus is vulnerable to horse trading.
Executives say that for some banks, it could take years tomake arrangements to operate all their business lines in the EU.For that to happen seamlessly, Britain would need to remain inthe bloc during that window to avoid legal uncertainties inbanks' dealings with clients.
Alex Wilmot-Sitwell, who heads the European business of Bankof America Merrill Lynch, likened moving operations to handlinghazardous materials.
"The materials that are being moved are risky materials, andyou don't move nuclear waste in a race," he told a parliamentarycommittee last month. "You do it in a very carefully coordinatedand managed process."
To add to the banks' uncertainty, the government says it hasnot yet made up its mind on whether to push for a deal.
Two finance executives said ministers told them a finaldecision would only come after they have considered demands fromother industries.
While the Treasury backs the banks, other departments,including the Department for Exiting the European Union, want towait and see if a deal has support among other industries beforemaking a final decision, the executives said. (Editing by Giles Elgood)
