* Firms have lobbied for agreement to be released
* Many firms unhappy with compensation process
* Tyrie says regulator took too long to co-operate (Adds comment from lawmaker Tyrie, swaps adviser)
By Matt Scuffham and Steve Slater
LONDON, Feb 12 (Reuters) - British lawmakers have publishedan agreement between banks and the financial regulator over howbanks should compensate small firms mis-sold hedging products,potentially making it easier for businesses to pursue claims.
The Financial Conduct Authority (FCA) agreed the terms of ascheme to compensate thousands of small companies that weremis-sold complex products known as interest rate swaps in 2012with nine banks including Royal Bank of Scotland, LloydsBanking Group, Barclays and HSBC.
But it quickly attracted criticism with more than a third ofbusinesses excluded from the scheme because they were deemed tobe "financially sophisticated" and many of the firms that wereallowed into it offered alternative hedging products by banksrather than cash compensation.
Parliament's Treasury Select Committee (TSC) publisheddetails of the agreement on Thursday after taking evidence fromFCA Chief Executive Martin Wheatley on Tuesday.
Lawmakers had criticised the regulator for not releasingdetails of the agreement sooner.
"The FCA took far too long to cooperate and did so onlyafter many requests and persistent pressure from the committee,"TSC chairman Andrew Tyrie said.
Many firms and their advisers have complained that it isdifficult to appeal decisions without being in possession of theoriginal agreement.
Martin Berkeley, a senior consultant at Vedanta Hedging,which advises on interest rate hedging products, said therelease of the original agreement would be welcomed bybusinesses pursuing compensation.
"It may potentially be able to help people. It's importantclients have confidence in the process and the TSC hashighlighted serious concerns," he said.
The products were meant to protect firms against risinginterest rates, but when rates fell the companies had to payextra charges, typically running to tens of thousands of pounds.They also faced hefty penalties to extricate themselves from thedeals, which many said they were unaware of.
Banks set aside 4.4 billion pounds to compensate customersbut have so far paid out just 1.8 billion pounds incompensation.
"The Committee remains very concerned that terms of theFCA's redress scheme may, in some cases, have provided bankswith an opportunity not to provide meaningful redress. Manyfirms feel that this process has unfairly favoured the banks,"Tyrie said. (Editing by Mark Potter)