Britain’s financial regulator has written to the bosses of the country’s biggest four banks to tell them to speed up the process of compensating small firms mis-sold complex hedging products.

Banks have paid out only a tiny fraction of the £3 billion they set aside for compensation, data from the Financial Conduct Authority (FCA) showed today.

The banks have so far handed out £15.3 million, with 125 offers accepted by customers. The regulator ordered a review of nearly 30,000 cases in May having identified serious failings in the way the products were sold.

The FCA said today that progress in paying out compensation had so far been slower than expected but there had been a significant pick-up in October.

“We gave the banks six to 12 months to complete their reviews from the start of the process and are frustrated that they are all expecting to meet the lower end of our expectations,” the FCA said on its website.

The regulator said current trends suggested banks will not meet the deadline, so it has written to the bosses of Royal Bank of Scotland, Lloyds Banking Group, Barclays and HSBC to make its expectations clear and agree practical ways to speed up the process.

The products were designed to protect smaller companies against rising interest rates, but when rates fell, they had to pay large bills, typically running to tens of thousands of pounds. Companies also faced penalties to get out of the deals, which many said they had not been told about. (Reuters)