By Francesco Canepa
FRANKFURT (Reuters) - The European Central Bank expects London-based banks seeking to keep access to the European Union's single market once Britain leaves the bloc to move key functions, branches and dealing operations, the ECB's top supervisor said on Thursday.
The ECB, the euro zone's banking supervisor, has had many inquiries from British-based banks wanting to come under its watch and may give them an expedited entry.
But Daniele Nouy reiterated Frankfurt would not sanction "empty shells" and said bank branches as well as key functions should be attached to the holding company supervised by the ECB.
"We don't want to authorize empty shells," Nouy, head of the ECB's Single Supervisory Mechanism (SSM), told a hearing of the European parliament.
"We want what is needed in the SSM to be domiciliated in the SSM, so internal control, risk management and so forth."
She said the ECB should be allowed to supervise broker-dealers, too, closing a loophole and giving it authority over a key area of business for investment banks.
"Some investment banks in London can be attracted by countries saying 'I will give you the status of broker-dealer so you'll be supervised by me and not by the SSM'," Nouy said.
"So this will have to be addressed."
British Prime Minister Theresa May will trigger divorce proceedings with the European Union on March 29, launching two years of negotiations that will help determine the future of Britain and Europe.
Brexit could reshape Europe's financial landscape if Frankfurt, Paris, Luxembourg and Dublin win business from London.
(Reporting by Francesco Canepa; Editing by Catherine Evans)