LONDON (Reuters) - Tens of thousands of jobs in Britain’s financial services sector could be lost if euro clearing shifts to continental Europe and full access to the bloc’s single market is lost, top industry officials said on Tuesday.

FILE PHOTO - Participants hold a British Union flag and an EU flag during a pro-EU referendum event at Parliament Square in London, Britain June 19, 2016. REUTERS/Neil Hall/File Photo

London has become the world’s biggest centre for clearing euro-denominated financial contracts, and some continental policymakers want this shifted to the euro zone after Brexit.

Xavier Rolet, chief executive of the London Stock Exchange Group LSE.L, owner of the world's biggest clearing house for euro-denominated contracts, said that without clarity on what happens to markets after Brexit, clearing customers in London will leave.

Some tens of thousands of jobs could leave London, not just from clearing itself, but also from ancillary services like software and IT, risk management, and administrative staff, Rolet told parliament’s Treasury Select Committee.

To avoid customers quitting London when Britain begins formal divorce talks with the EU in March, existing rules should stay in place until 2022 to avoid disruptions that could undermine financial stability, Rolet said.

Already, banks with large London operations say they will step up lobbying European officials because they are running out of arguments to convince the British government the industry needs single market access.

Douglas Flint, chairman of HSBC bank HBSA.L, told the lawmakers that banks without operations elsewhere in the EU will likely trigger migration plans immediately after EU divorce talks begin in March, estimating that "tens of thousands" of jobs are linked to EU "passporting" rights.

Currently, banks have passporting rights, allowing them to operate across the 28-nation bloc from a base in Britain. They could lose this right under Brexit.

Possible job losses in banking would depend on how lenders in Britain negotiate new licences with regulators on the continent, raising question marks about the back office staff across Britain’s regions.

This could hit JPMorgan JPM.N, Citigroup C.N and Deutsche Bank DBKGn.DE which currently employ thousands of back-office staff in regional cities around Britain in places such as Bournemouth and Glasgow.

“Clearly you would need to move the front part of the business,” Flint said. “The question would be whether the negotiation would allow the middle and back office, the settlement, the risk management, the accounting and so on to be done out of the EU 27.”

Rolet said that since Britain’s referendum on the EU, he has heard of calls made by continental European regulators to customers, warning them of the risk of euro clearing leaving Britain.

“That resulted in commercial pressure on our business,” Rolet said.

The EU is reviewing its derivatives trading and clearing rules which could include ways to making it impossible to clear euro-denominated contracts in the UK, Rolet said.

“Those sort of pesky, well-targeted, seemingly minor regulations that actually have a major impact on customer behaviour.”

It would amount to an effective control on currencies in the EU and backfire on the bloc, he added.

Flint, Rolet and Allianz Global Investors Vice Chair Elizabeth Corley appearing before the lawmakers all said a transitional deal would need to last until at least 2021 to allow companies enough time for a smooth departure from the EU.

Flint said one of his biggest concerns is that by Britain leaving the EU the regulatory rules that have converged in the decade since the start of the global financial crisis risk being fragmented, undermining economic stability.

“After 10 years of putting it in place it would in my view, be seen with hindsight, as one of the worst actions that could have ever taken place,” Flint said.