UK's FSA tells bank CEOs to review arrears policies

LONDON, Nov 28 (Reuters) - The UK Financial Services Authority has written to the chief executives of Britain's mortgage banks warning them to treat customers who go into arrears fairly, the watchdog said on Friday.

In the letter the regulator said it expected the executives to review their current arrears policies, and asked them to inform it of any planned changes by Jan. 31.

"Conditions in the mortgage maket are difficult and it seems likely that these conditions will persist for some time," Jon Pain, the FSA's retail managing director, said in the letter.

"Where we find that lenders are not complying with our requirements we will make appropriate and properly targeted use of our existing regulatory tools, which may include enforcement action."

Slowing economic growth has led to an increase in mortgage arrears, prompting a rise in the number of homes repossessed by banks.

The FSA requires banks to have a written policy and written procedures in place setting out how they deal with arrears, and stipulates that repossession should be used only as a last resort. (Reporting by Myles Neligan; Editing by Greg Mahlich)