Last checked at 
* 306 million paid out by end Jan vs 159 mln by end Dec
* Banks have set aside 3.75 bln stg for mis-selling
* Regulator says compensation flowing to small businesses
* Banks have yet to pay out for consequential losses
By Matt Scuffham
LONDON, Feb 4 (Reuters) - Britain's biggest banks have sofar paid out less than 10 percent of the 3.75 billion pounds ($6billion) they have set aside to compensate small firms mis-soldinterest rate hedging products, data from the financialregulator showed on Tuesday.
The Financial Conduct Authority (FCA) said that 306 millionpounds ($500 million) had been paid out by Britain's biggestfour banks - Lloyds Banking Group, Royal Bank ofScotland, Barclays and HSBC - by theend of January. That compared with 159 million at the end ofDecember.
The mis-selling of complex financial products is one ofnumerous scandals facing the UK banking sector that range fromproblems in consumer finance to interest rate rigging in globalfinancial markets. The latest payments come on top of more than20 billion pounds set aside by the banks to compensate customersmis-sold loan insurance.
The interest rate hedging products were designed to protectsmaller companies against rising interest rates but when ratesfell, they had to pay large bills, typically running to tens ofthousands of pounds. Companies also faced penalties to get outof the deals, which many said they had not been told about.
"Redress is now rapidly flowing to small businesses," CliveAdamson, the FCA's director of supervision said on Tuesday.
Daniel Hall, managing director of All Square, which advisescompanies pursuing claims, said the real issue for banks couldbe claims for so-called consequential losses, which have notbeen factored into the payouts made so far.
Those claims would effectively set the clock back to thepoint before the products were sold and would require banks tocompensate not just the direct cost of the mis-sold contractsbut any losses that businesses have suffered as a result ofleaving the agreements.
"Our estimate of the final bill for consequential losses isdouble that of direct losses," Hall said on Tuesday.
The FCA had ordered banks to begin paying compensation lastMay after saying there were serious failings in the way theywere sold. It said on Tuesday that all four banks were on trackto complete the compensation process within a year of the schemestarting. It urged firms that had not yet agreed to have theircase reviewed in the scheme to do so.
There are 18,700 firms that have so far agreed with banks tohave their cases reviewed. 2,092 firms had accepted compensationor alternative products, up from 1,040 at the end of December.
In 1,741 of the cases, banks tore up the arrangement andpaid cash compensation. In the remaining 351 cases, businesseshave been offered alternative products. In 372 cases, the reviewfound no compensation was required.
The average payout per offer of compensation stood at146,000 pounds at the end of January, less than the 152,500average at the end of December.
The FCA data showed differing rates of progress in dealingwith cases between the banks. RBS has told customers the outcomeof the review in 2,429 cases, compared with 1,688 at HSBC, 1,041at Barclays and 819 at Lloyds.
Both RBS and Lloyds have increased the amounts they have setaside for compensation in the past two weeks.
RBS has more claims under review than its big three rivalscombined. It is assessing 9,039 cases, compared with 3,315 atHSBC, 3,250 at Barclays, and 1,756 at Lloyds.
RBS has set aside 1.25 billion pounds for compensation, lessthan the 1.5 billion at Barclays, which has made the biggestprovision of all the banks. Lloyds has set aside 530 million andHSBC 460 million.
