Big banks have paid out less than 10% of the £37.5 billion pounds they owe to small firms for mis-selling them interest rate hedging products.

The Financial Conduct Authority (FCA) reported today that Britain’s biggest four banks – Lloyds, RBS, Barclays and HSBC – have only paid £306 million between them to date.

A redress scheme was set up by the FCA in June 2012, with £20 billion set aside by big banks to compensate those affected by the scandal. But compensation has been consistently slow, with the FCA having to make several orders to get banks to pay.

Clive Adamson, director of supervision for the FCA, said:

“Our focus will remain on ensuring that during the decision process affected business owners are treated fairly and that banks remain on course to get their initial offers of compensation out by the end of May.”

These complex financial products were designed to protect small businesses from rising interest rates. However, when rates actually fell, these firms were left with huge bills to pay and hidden penalties to get out of the deals.

Experts say that banks could potentially expect to have to pay out double than expected if small businesses are allowed to claim for consequential losses.