UPDATE 1-HSBC appoints former LSE chief Clara Furse to chair UK retail bank

* Furse quits Bank of England role to chair HSBC unit

* FPC role involved setting UK's bank capital rules

* Furse wanted "more active role" than FPC position

* Lawmakers had "serious concerns" about BoE appointment (Adds further details, background)

By Andrew MacAskill and Huw Jones

LONDON, Nov 1 (Reuters) - HSBC, Europe's biggestbank, has appointed Clara Furse, a former chief executive of theLondon Stock Exchange, to chair its ring-fenced UKretail business.

Furse stepped down from her role as a member of the Bank ofEngland's Financial Policy Committee on Tuesday in order to takethe job at HSBC, where she will oversee its British retailbanking and wealth management, commercial banking and globalprivate banking operations.

"We are thrilled to have secured Clara as chairman of theHSBC UK board," Group Chairman Douglas Flint said in astatement. "She brings unrivalled knowledge of the UK'sfinancial markets, systems and regulatory architecture."

Furse faces a three-month cooling-off period after leavingthe BoE before she can start at HSBC. Her role on the FPCinvolved setting the regulatory framework for British banks.

Britain's ring-fencing rules aim to avoid a repeat of the2008 financial crisis, when banks' bad bets in wholesalefinancial markets put ordinary depositors' cash at risk, and ledto big taxpayer-funded bailouts.

The rules apply to all banks in Britain that have bothretail and commercial or investment banking activities.

HSBC's ring-fenced bank will be headquartered in Birminghamfrom 2018, a year before the separation of the business has totake place.

Furse struggled initially to convince UK lawmakers that shewas suitable as a member of the FPC, a new watchdog launched in2013 which at the time needed to muster credibility quickly.

After an awkward session before parliament's Treasury SelectCommittee, lawmakers said they had "serious concerns" aboutFurse's appointment to the new watchdog.

This they said related to her lack of awareness about theimportance of asserting the FPC's independence, and her role asa non-executive director at Fortis, the Belgian bank that had tobe bailed out in the financial crisis.

On her reappointment to the FPC, lawmakers said in Marchthis year that some of her responses to their questions "were asource of concern", and that she made no reference to potentialrisks from Brexit in her written evidence.

In a statement released by the BoE, Furse said she wouldmiss the FPC's "intense and important deliberations", but wantedto play "a more active and direct role in supporting the UK'seconomic ambitions at a time of great change".

Furse also made it clear in March that she believed thereshould be no rush to force banks to hold more capital becauseshe worried that an increase in the requirement could choke offmore lending.

The FPC went ahead with implementing a gradual rise incapital requirements, a policy which was then scrapped in thelight of the June referendum vote to leave the European Union.

When Furse, a former derivatives trader, headed the LondonStock Exchange she lost out in 2001 to Paris-based Euronext in a fierce battle to acquire London's LIFFEderivatives exchange, despite making a higher bid.

Failing to acquire LIFFE left the LSE vulnerable and led toFurse fighting off a series of takeover bids before steppingdown in 2009. She was succeeded by Xavier Rolet, who negotiatedthis year's deal to merge the LSE with Deutsche Boerse. (Additional reporting by David Milliken; Editing by GregMahlich)