LONDON (Reuters) - The European Union’s banking watchdog will publish guidance on new EU hubs and trading risks for lenders from Britain seeking a post-Brexit base in the bloc, its chairman said on Monday.

FILE PHOTO - Andrea Enria, chairperson of the European Banking Authority, speaks at Reuters Summit interview in London, Britain, September 25, 2017. Picture taken September 25, 2017. REUTERS/Afolabi Sotunde

Banks in London are looking to open or expand hubs in the EU to ensure they can continue serving customers there after Britain leaves the bloc in March 2019.

The guidance will support a smooth relocation process and avoid regulatory competition, EBA Chairman Andrea Enria told a European Parliament hearing.

“These include authorisations, approval of internal models, treatment of outsourcing, back-to-back operations and risk transfers, matters related to resolution and deposit guarantee schemes,” Enria said.

Thousands of banking jobs are expected to shift from London to the EU in the coming years to staff new hubs because future UK-EU trading relations remain unclear.

International investment banking is largely based on “back-to-back” operations in which market risks from trades with customers in several countries are handled centrally in a single financial centre such as London.

Investment banks in London want to continue using the UK capital to manage risks centrally to avoid costly duplication, but this has raised concerns among regulators that new EU hubs will be “letter boxes” devoid of senior staff.

“We don’t want to disrupt this mechanism, but at the same time you want to avoid empty shells,” Enria said.

The EBA guidance will say that risks from customers should be managed locally, while market risk can still be dealt with at the parent in London, Enria said, adding that EU supervisors must have access to “relevant information” on how market risks were being handled in London.

EU regulators should also insist on market risks being managed locally if market shocks loom, Enria said.

It marks a more accommodative tone than comments from the European Central Bank, which will actually license the new hubs in the euro zone.

The guidance will be published in the coming days.

Similar guidance from the bloc’s securities watchdog ESMA has already rung alarm bells at asset managers in London, who fear they won’t be able continue managing funds in the EU after Brexit but will be forced to have many senior managers based in new hubs in the bloc as well as back home.

ESMA Chairman Steven Maijoor told the same hearing that its guidance on “delegation” was justified given that some national supervisors appeared more concerned with attracting new fund hubs than ensuring that their supervision is adequate.

“This is about a request to have three people located in the place that is the formal registration of that fund. I find it difficult to see this as an onerous requirement,” Maijoor said.