UPDATE 2-UK watchdog says bank customers may need longer-term crisis support

(Adds banking reaction, credit impact of forbearance)

By Huw Jones

LONDON, July 31 (Reuters) - Britain's banks may need to
consider longer-lasting support for customers who continue to
face difficulties with loan repayments after COVID-19 relief
measures end in the autumn, the Financial Conduct Authority
(FCA) said on Friday.

The watchdog launched a "call for input" to determine what
further measures may be needed when repayment holidays
introduced after the pandemic lockdown for home loans and credit
cards - and renewed once already - come to an end on Oct. 31.

Banks have provided more than 1.8 million mortgage payment
deferrals and in excess of 1.6 million personal loan and credit
card payment holidays, the FCA said.

Though the FCA expects most borrowers to be able to resume
payments, it said a significant minority would need further
support after many also borrowed from family and friends to keep
up payments on other loans.

"We consider that the appropriate time for firms to move
beyond blanket deferrals is at the end of the customer’s second
deferral," the FCA said.

Many borrowers will need a longer-lasting form of support,
which could include deferring payments of capital, interest,
fees and charges, it added.

The FCA has said payment holidays to date should not affect
a person's credit rating, but on Friday noted that further
support or forbearance should be reported as normal on a credit
file.

UK Finance, which represents banks, said delivering ongoing
support for customers whose finances have been hit by the
pandemic was a priority for the banking and finance industry.

The call for input closes on Aug. 7.

"The responses to this call for input will inform our
assessment of what further guidance may be needed on how firms
should support customers that have already been provided
temporary support under our guidance," the FCA said.

If responses show further measures are needed, the FCA said
it would publish a draft paper on mortgages in late August,
followed by draft guidance on consumer credit in mid September.
(Reporting by Huw Jones; Editing by David Goodman and Mark
Potter)