No push to make Deutsche Bank exclusively German -Co-CEO

* European banks not ready to expand balance sheets -Jain

* Needs strong capital markets to offset banks -Jain

* EU Commissioner- we look at jobs growth effect of rules (Adds Co-CEO comment, background)

FRANKFURT, March 17 (Reuters) - Deutsche Bank (Xetra: 514000 - news) is under no pressure to focus its business on its domestic market or abjure international investment banking, its Co-Chief Executive Anshu Jain said on Tuesday.

Other major European banks such as RBS (LSE: RBS.L - news) are effectively getting out of some investment banking, following a wave of more restrictive regulation in the wake of the financial crisis.

"As I talk to regulators and talk to politicians in Berlin, there is very little debate; I don't sense a great move to make Deutsche Bank an exclusively German institution," Jain told a financial conference.

"Why would you want to have a domestic only banking sector, when your underlying economy is so profoundly global?" he asked.

Germany's biggest lender has been looking at its strategy, with sources familiar with the situation saying it was weighing splitting off its Postbank retail banking operations.

Jain told the conference that Deutsche Bank was committed to maintaining its global profile and providing capital market services that Europe must have if it is to grow and create jobs.

European banks were still uncertain about the impact of tougher safety rules for bank capital, which was having an effect on the supply of credit, he said.

"European banks still feel somewhat capital light," he said.

"I don't see European bank balance sheets expanding substantially anytime soon; we'll be lucky if we can stop the contraction," Jain said.

This is a problem for Europe, where two-thirds of the credit the economy needs to run is provided by banks, rather than the equity, corporate bond or asset-backed securities markets.

Europe would be unwise to allow U.S. investment banks to enjoy a monopoly in capital market services, Jain said, pointing out that U.S. banks slashed credit to Germany in the financial crisis.

"If Europe is going to grow, it needs a better balance between capital markets and bank lending. Deutsche Bank and other banks are vital to achieve that," he said.

The message has already been received by European politicians.

EU Commissioner for financial services Jonathan Hill, speaking at a separate conference in Frankfurt on Tuesday, said he planned to vet any new rule under a strict question:

"Is it proportionate and have we looked at it through the prism of jobs and growth?" he asked. (Reporting by Jonathan Gould; Editing by Kirsti Knolle and Susan Thomas)