* Equivalence framework covers a fraction of finance business
* Bank shares rocked by threat to Theresa May's premiership
* Industry cautiously presses on with post-Brexit reorganisation
* Lawyer says equivalence could get broadened out eventually
* GRAPHIC: tmsnrt.rs/2Dplp17 (Recasts, adds detail, updates shares)
By Sinead Cruise, Huw Jones and Andrew MacAskill
LONDON, Nov 15 (Reuters) - Britain's financial services industry has greeted news of a draft Brexit agreement with weariness and worry, spooked by a political revolt that could topple the government and bring fresh troubles to a sector already reeling from upheaval.
Broad disappointment in a blueprint that offered only basic access to European markets was quickly eclipsed on Thursday, when a wave of ministerial resignations cast doubt over the future of Prime Minister Theresa May and her ability to push the divisive plan through parliament.
Shares in blue-chip banks tumbled after Brexit Minister Dominic Raab resigned to protest the deal with the European Union, saying it presented a "very real threat to the integrity" of the UK. Three other ministers followed suit.
Shares in state-supported Royal Bank of Scotland plunged 10 percent, their biggest one-day fall since the June 2016 referendum on Britain's departure from the EU, as the main opposition Labour Party said the government was "falling apart".
Barclays and Lloyds Banking Group dropped 5 percent and 6.3 percent respectively by 1420 GMT.
"The mood music today is that it doesn't do for the City's financial sector," said Chris Beauchamp, chief market analyst at IG.
The scale of rebellion against May's plan, agreed just hours earlier by her cabinet, remains unclear, but the industry has found little to celebrate in its proposals. It gives UK banks, insurers and asset managers limited access to European financial markets after a transition period that starts in March and is due to end in December 2020.
Such an arrangement, known as equivalence, would give Britain access to the EU similar to the U.S. and Japan, while tying it to many EU finance rules for years to come.
Industry leaders, including John McFarlane, the outgoing Chairman of Barclays and lobby group CityUK, had hoped policymakers could negotiate an "enhanced equivalence" relationship between the UK's financial industry and the EU, as set out by the government in a white paper earlier this year.
But the 568-page document gave little grounds for optimism that such an alliance - offering greater access and tighter safeguards against a sudden loss of rights - would be forged.
"We are not going to get anything more than the U.S. gets. The only addition is that equivalence can be applied for in the transition period, fast-tracked," said a U.S. investment bank official based in London.
"We don't really figure in any of this. The deal is all about solving the Irish question and customs union," the official said. "The rest of it is about divergence and competitiveness for services. Raab has resigned. It all feels very knife edge."
Analysts predicted a freefall by UK assets, with risks of major economic disruption and a change in government looming large. Policy responses could include a cut to base rates, according to Investec analyst Ian Gordon, which could further hurt bank profit margins.
"The tone of May's speech last night was telling, and she was explicit about the difficulties likely in coming days," said Alastair George, chief investment strategist at Edison Investment Research.
"A 'no deal' or 'hard Brexit' proposal would similarly struggle in the current Parliament, leaving a delay to the UK's exit from the EU and a general election as the most likely scenario in our view."
British financial regulators held a conference call with major banks to seek feedback on market conditions after the pound sank, sources said.
One source said the call was a direct request from Bank of England Governor Mark Carney. The Bank of England declined to comment.
PESSIMISM Britain's decision to leave the EU has put the future of the UK's financial services industry in jeopardy, forcing many of its biggest players to transfer talent, activity and capital to smaller EU financial hubs to hold onto European clients.
Currently, banks and insurers based in Britain enjoy unfettered access to customers across the EU. But equivalence excludes major activities such as commercial bank lending and covers just a quarter of all EU cross-border financial services business, according to some estimates.
The British government has pledged to push for changes to the existing system of equivalence. Two lawyers said the bare- bones reference to the framework in the Brexit deal could get fleshed out in coming weeks.
"I anticipate a form of enhanced equivalence along the lines that the British government proposed ultimately being agreed," said Barney Reynolds, a financial services lawyer at Shearman & Sterling.
With little certainty on the fate of the deal and whether May can survive a backlash from a growing number of political opponents, senior industry sources said banks would move ahead with plans to Brexit-proof their businesses accordingly.
"We are monitoring the negotiations ... However, we are continuing to establish an EU subsidiary in Frankfurt to ensure we can provide uninterrupted services for our clients in all potential circumstances," a Standard Chartered spokesman said.
Ohers said they feared a far longer phase of volatility.
"... This deal is now the only game in town - there is now no time to negotiate another deal. We thought we had stability - now we have instability writ large," said Iain Anderson, executive chairman of public affairs firm Cicero, which represents many finance companies.
additional reporting by Lawrence White and Iain Withers; editing by Larry King