* Brexit putting relationships to the test
* European financial system will have to evolve due to Brexit
* Euro clearing should be located in the EU
* Deregulation presents a risk to global economy
By Helen Reid
LONDON, Nov 23 (Reuters) - Top European Central Bank policymaker Francois Villeroy de Galhau said Britain's divorce with the European Union was putting strain on its friendship with the bloc, and that deregulation would put global financial systems on course towards another crisis.
With the outcome of Brexit negotiations difficult to predict, Villeroy emphasised both parties had to work together to ensure a mutually beneficial outcome.
"We are indeed going through a difficult period which puts the friendship between our countries to the test," Villeroy, who is also governor of the Bank of France, said in London at an event by the French Chamber of Commerce in Great Britain.
The structure of the European financial system will have to evolve as a result of Brexit, he added, also emphasising that all banks and companies should prepare to avoid any potential cliff-edge risk.
British banks should not get passporting rights to operate in Europe if they do not accept single market rules, and euro clearing activities - 70 percent of which are currently conducted in London - must be located in the currency bloc, Villeroy said.
Paris has "obvious advantages" as a financial centre, he added, saying he was "proud and happy" the French capital had on Monday won the right to host the European Banking Authority after it vacates London.
French president Macron's push to reform the labour market and reduce taxes would have a "significant" impact on growth and employment, the central banker said.
The euro area recovery is robust and broad-based across countries and sectors, he added, saying the ECB's accommodative monetary policy has helped spur growth.
The most pronounced risks to the global economy came from shifts towards "unilateral deregulation" and protectionism, in particular from the U.S. since the election of President Trump, Villeroy said.
"Unilateral deregulation would be nothing less than a lose-lose scenario with serious consequences for the stability of the global financial system - we would be paving the way for the next financial crisis," he said.
In a separate speech on Wednesday, Villeroy had said tougher financial regulation should not, however, hinder potential cross-border bank mergers in Europe, over which speculation has been swirling in recent weeks.
Minutes from the ECB's meeting last month, also published on Thursday, showed policymakers broadly agreed on extending its asset purchase scheme but that a decision to keep the bond buys open-ended generated fiercer debate.
Reporting by Helen Reid