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Britain's banks paid out $1.4 billion for swaps mis-selling

[May 08, 2014]   LONDON (Reuters) — Britain's biggest banks have so far paid out only about a fifth of the funds they set aside to compensate small businesses mis-sold interest rate hedging products, data from Britain's financial regulator showed on Thursday.

The Financial Conduct Authority said that, by the end of April, compensation amounting to 798 million pounds ($1.35 billion) had been paid to 5,732 customers.

Britain's biggest four banks - Barclays <BARC.L>, HSBC <HSBA.L>, Lloyds Banking Group <LLOY.L> and Royal Bank of Scotland <RBS.L> - had set aside 3.75 billion pounds to deal with the issue.

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 when they bought them.

($1 = 0.5894 British Pounds)

(Reporting by Matt Scuffham; Editing by Chris Vellacott)

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