UPDATE 1-Bankers urge UK to forge closer ties with European Union

Jan 21 (Reuters) - Britain should build closer ties with theEuropean Union and devote more resources to Brussels toinfluence financial market reform and benefit the economy, thecountry's leading banks said.

The British Bankers' Association (BBA) weighed into thedebate over Britain's role in Europe on Wednesday, adding itsvoice to those of other businesses that favour Britaincontinuing its membership of the 28-member trading bloc.

Prime Minister David Cameron has promised voters he wouldrenegotiate the terms of Britain's EU membership before holdingan in-out referendum by 2017 if his ruling Conservatives winelections due next year. Finance minister George Osbornerecently warned the EU it must reform if it wants Britain toremain a member.

"Given the significance of financial services to the UK andthe degree to which legislation is set at an EU level, there isan overwhelming case for the UK to devote further resource andexpertise in engaging in the European process to increase thelevel of influence in priority areas," the BBA said in asubmission to a UK Treasury review into the division of powersbetween London and Brussels.

The BBA said membership of the EU enhanced Britain's abilityto influence international negotiations.

But the European Commission needed to ensure plans for aeuro zone banking union did not mean the euro area became "amarket within a market," the BBA warned.

It said the single EU market was a significant factor inLondon's success as Europe's financial hub and therefore ofconsiderable value to the economy.

U.S. bank Citigroup, which has a big presence inLondon, also warned against Britain opting out of the EU andsaid such a move could hurt the economy and reduce investmentfrom international companies.

Jim Cowles, Citi chief executive officer for Europe, MiddleEast and Africa, told the Financial Times there was "mountingconcern" among clients about their ability to use Britain as aregional hub if the country exits the EU.

"It is not that international companies will stop investingin Britain, but their investment just will not be at the scalewe have become accustomed to," Cowles told the newspaper. Citiconfirmed the comments were accurate.

European aerospace group Airbus, one of Britain'slargest employers, on Tuesday voiced concerns over thepossibility of the country leaving the EU, saying the benefitsof an alternative economic model needed to be proven.

The London-based Centre for European Reform (CER) predictedlast week that Britain would struggle to maintain trade withother EU member states - now 54 percent of goods trade - if itleft the bloc.