REUTERS SUMMIT-London's future as finance hub at risk outside EU- BoE's Bailey

(For other news from Reuters Financial Regulation Summit, clickon http://www.reuters.com/summit/FinancialRegulation16)

By Huw Jones and Andrew MacAskill

LONDON, May 16 (Reuters) - London has no "God given" rightto remain a global banking centre if Britain were to leave theEuropean Union, Bank of England Deputy Governor Andrew Baileysaid on Monday.

Some 250 foreign banks employing thousands of people arebased in London, making it one of the world's major financialcentres and a rival to New York.

Bailey told the Reuters Regulation Summit this could changeif Britain voted to come out of the EU in a June 23 vote.

"We need a banking system to support the domestic economybut I am afraid we don't have a God-given right to have anythingin terms of international. That decision will be taken by manyactors over time," Bailey said.

The EU provides rules for banks, insurers and asset managersthat provide a "passport" for them to operate freely across thebloc's single market. This includes banks from outside Europe,such as the United States and Asia.

"What matters to them a lot is having the passport. If youare a non-EU firm operating in London, then having the passportis important," Bailey said.

Over the longer term, international banks always have"optionality" on where they do their business, he said referringto their ability to move operations elsewhere.

Backers of Brexit say the City of London financial sectorwould still be able to thrive outside the EU.

But politicians, policymakers and business leaders who wantBritain to stay in the EU have warned of the numerous economicrisks of leaving, including potential damage to the City ofLondon financial centre.

BoE Governor Mark Carney has come under attack from Brexitsupporters, who have accused him of overstepping the mark in hiswarnings about the impact of leaving the bloc.

Bailey, who also heads the BoE's Prudential RegulationAuthority, said it was the Bank's job to highlight the risks.

"We would be failing in our job if we didn't," he said.

CONTINGENCY PLANS

Bailey said he was having "daily" conversations withBritain's banks on how they would cope with the immediatefallout from a Brexit.

Analysts expect a lot of volatility across financialmarkets, including the potential for sterling to lose up to afifth of its value.

"All the banks are looking at this very actively," saidBailey, who will take up a new job as chief executive of theFinancial Conduct Authority in July.

The Bank of England is paying special attention to thebanks' funding needs to ensure money keeps flowing to theeconomy and to avoid a repeat of the damaging credit crunch seenin the 2007-09 financial crisis.

"We have not seen any evidence of sterling funding issues atall. Generally the challenge for banks these days is to get areturn on funding rather than finding funding," Bailey said.

The BoE has already said it would open its taps around thetime of the referendum to reassure markets that there is noissue with liquidity.

"We are open for business for banks that want to take upthose operations."

Bailey said foreign currency funding needs also remainedsizeable in Britain and were an Achilles heel for some banksduring the financial crisis.

Banks do not rely on foreign currency funding as they didduring the crisis, but if needed the Bank could source foreigncurrency liquidity from other central banks.

"We have been quite clear what contingencies we have inplace. Clearly, our arrangements with other central banks,"Bailey said.

"We are not complacent, but it is a different starting pointfrom the one we had in the past."

He believes that Britain's banks are far more resilient tomajor shocks than during the crisis and could continue toprovide money to the economy even under quite severe stress.

"We do start in a different place in terms of resilience ofbalance sheets," Bailey said, referring to discussions withbanks about contingency plans for a potential Brexit.

"There are a lot of conversations, but they are not the sortof conversations we were having in the height of the crisiswhich was 'how are we going to get through this'," Bailey said.

He checks on banks' funding each week and this could be donedaily if need be.

Follow Reuters Summits on Twitter @Reuters_Summits (Reporting by Huw Jones and Andrew MacAskill, editing by JaneMerriman)