UPDATE 1-Politicians condemn 'quiet scandal' of British bank closures

* MPs cite Reuters report on bank branch closures

* Over 90 pct of closures in poorer areas

* Call for tougher US-style legislation (Adds politicians' comments)

By Andrew MacAskill and Lawrence White

LONDON, June 30 (Reuters) - British politicians have urgedbanks to provide more services in poor areas after a Reutersarticle showed the largest are disproportionately closingbranches in the lowest-income areas while expanding in wealthierones.

The analysis published last week found more than 90 percentof the branch closures were in areas where the median householdincome is below the British average of 27,600 pounds($36,600).

"The research is very worrying and I hope the Treasury areaware of it," James Heappey, a Conservative member of parliament(MP), told the House of Commons in a debate on Thursday.

"It is important to make sure that (banks) are not focusingtheir branch network on the areas where they can make the mostcash, when the nation collectively bailed them out not too longago," he said.

Britain's biggest banks, HSBC, Barclays,Royal Bank of Scotland and Lloyds Banking Group, have been steadily shrinking their branch networks tocut costs while investing in online and mobile banking services.

MPs in the debate said Britain should consider emulating theUnited States in requiring banks to maintain branches andlending in poorer areas.

The U.S. Community Reinvestment Act of 1977 is designed toreduce discriminatory lending by requiring banks to lend incommunities where they are chartered. The U.S. law can block theopening of new branches elsewhere if a bank does not comply.

The major banks have all said they close branches based ondeclining footfall, as consumers move to online banking, andthat they study the impact of such closures carefully.

RBS, Lloyds and Barclays declined to comment for this story.A spokesman for HSBC said the bank has launched a digitalservice that allows small businesses to apply for loans withoutvisiting a branch.

Christian Matheson, a Labour member of parliament, said the Reuters study, which covered the year to April, showed a crisis.

"There can be no more cavalier closures of bank branches,which in turn damage the local economy," Matheson said.

"In 2008 we apparently learnt that some big banks are toobig to fail. Perhaps the message today is that some local banksare too important to local communities to close."

MPs called in the debate for banks to share branches insmaller communities, and to be more transparent about closures.

Closures have more than halved lending growth to smallbusinesses in the areas affected, separate research released onThursday showed.

Campaign group Move Your Money estimated lending growth tosmall local businesses was down by 63 percent in towns andvillages that had lost a bank branch.

A spokesman for the British Bankers' Association (BBA) saidbanks have signed up to protocols aimed at minimising the impactof branch closures, including partnering with post offices tooffer services and carrying out impact studies before closures.

"Banks are determined to leave no one behind," he said.

But MP for Tottenham David Lammy said banks were using theirAccess to Banking Protocol as a 'Trojan horse' to distract fromclosures.

This "is a quiet scandal and tragedy taking place across ourcountry," Lammy said in Thursday's debate.

Britain's vote last week to leave the European Union haspotentially triggered the biggest upheaval for banking since the2007-2009 financial crisis, raising risks of recession andearnings downgrades that hit bank shares. ($1 = 0.7551 pounds) (Editing by Sinead Cruise and Ruth Pitchford)