Last checked at 
* Recovery from "self-inflicted" wound unclear - McFarlane
* HSBC's Flint says no return to light touch regulation
* UK minister Baldwin says markets can cope with volatility (Adds Boleat of City of London)
By Huw Jones and Lawrence White
LONDON, June 30 (Reuters) - Britain needs to build a newinternational model for financial services after its decision toquit the European Union, a top banker representing an industrylobby group said on Thursday.
John McFarlane, chairman of TheCityUK, which promotesBritain's financial services sector, called for stable andeffective political leadership and clarity on what the UK wantsfrom talks with the EU after its "self-inflicted wound".
McFarlane, who is also chairman of Barclays, said"we neither know the shape or direction of things to come".
"It's far from certain what we might be able to secure fromdiscussions with the EU," he told TheCityUK annual conference.
Britain is not expected to begin negotiations with Brusselsuntil the autumn after a new prime minister has been chosen, andthe talks could take years to reach a deal on new trading terms.
There has been speculation that much of the trading done inLondon could shift to continental Europe following a Britishexit from the 28-country bloc, but McFarlane said Europe'scapital market had evolved in London rather than Paris orFrankfurt and would be incredibly difficult to replicate.
One critical point of debate in any talks will be the "EUpassport" which British-based banks, including major Wall Streetplayers such as JPMorgan and Goldman Sachs,depend on to be able to offer their services across the bloc.
The quid pro quo is that EU leaders are likely to demandthat for the UK to have continued access to the single market,it would have to respect the freedom for EU citizens to come toBritain, something which is seen as a tall order for pro-Brexitcampaigners who based their campaign on curbing immigration.
"We will come to a crunch point of free movement of labour,"Mark Boleat, head of policy at the City of London Corporation,told Reuters at the conference.
NO LIGHT TOUCH
While banks and asset managers had contingency plans for aBrexit, they said it was too early to act given that Britainwould remain in the single market for at least two years.
"We are all working on multiple scenarios. For many firms,it would be premature to activate all that pre-referendumplanning," said Claire Woodman, global chief operating officerfor institutional securities at Morgan Stanley.
Some City bankers hope privately that formal, two-year exittalks won't be triggered by Britain, although others said thiswas wishful thinking and urged the government to givereassurance that EU nationals have a secure future in finance.
After British banking stocks were hammered in the wake ofthe Brexit vote last week, Harriett Baldwin, a junior financeminister, sought to reassure the City of London, with banks wellcapitalised and the Bank of England ready to take action.
"Financial markets are capable of weathering challenges,they adapt quickly and they find new opportunities," she said.
Another likely area of discussion is financial regulation,with Britain traditionally seen as having a lighter-touch whenit comes to supervising its banks and brokerages than itsEuropean neighbours.
TheCityUK Chief Executive Chris Cummings said it was evenmore important for regulators to be "measured andproportionate", and not to hold back new growth areas likefinancial technology, known as "fintech".
But Douglas Flint, chairman of HSBC, told the conferencethere would be no return to light touch regulation, althoughnegotiations with the EU could offer an opportunity torecalibrate some rules.
Flint said that the fact that markets all functioned wellthis week, despite volumes surging to six times normal levels,showed that regulatory changes since the 2008 financial crisishad left the UK's financial system in robust shape. (Reporting by Huw Jones and Lawrence White; Editing by ElaineHardcastle and Alexander Smith)
