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* FCA says 15.3 mln stg paid out to small firms so far
* Banks have set aside over 3 bln stg for compensation
* Only 125 customers have received payouts
* Regulator writes to bank CEOs to speed up process
By Matt Scuffham
LONDON, Nov 7 (Reuters) - Britain's financial regulator haswritten to the bosses of the country's biggest four banks totell them to speed up compensating small firms mis-sold riskyproducts designed to insure them against rising interest rates.
Banks have set aside some 3 billion pounds ($4.8 billion) for compensation payments in this area, but have so far handedout just 15.3 million, or 0.5 percent of the total, data fromthe Financial Conduct Authority (FCA) showed on Thursday.
The regulator, which said only 125 offers had so far beenaccepted by customers, had ordered a review of nearly 30,000cases in May having identified serious failings in the way theproducts were sold.
The payouts are adding to the mis-selling bill for UK banks,which have also set aside more than 17 billion pounds tocompensate customers mis-sold loan insurance.
Many banks also face hefty fines for allegedly riggingreference interest rates such as Libor.
The FCA said on Thursday progress in paying compensation formis-sold interest-rate products had been slower than expected,despite a significant pick-up in October.
"We gave the banks six to 12 months to complete theirreviews from the start of the process and are frustrated thatthey are all expecting to meet the lower end of ourexpectations," the FCA said on its website.
The regulator said current trends suggested banks will notmeet the deadline, so it has written to the bosses of Royal Bankof Scotland, Lloyds Banking Group, Barclays and HSBC to make its expectations clear andagree practical ways to speed up the process.
The products in question were interest-rate swaps designedto protect smaller companies against rising rates, but whenrates fell they had to pay large bills, typically running totens of thousands of pounds.
INITIAL PAYMENTS
Companies also faced penalties to get out of the deals,which many said they had not been told about.
HSBC, RBS, and Lloyds have committed to speed upcompensation, making initial payments to customers beforepossible claims for consequential losses are assessed - a moveFCA Chief Executive Martin Wheatley called a "good first step".
Barclays has said it will make decisions on a "case-by-case"basis in order to support customers in financial distress.
Lloyds had said on Wednesday the number of customers that ithas informed of a compensation decision had quadrupled in thelast month to 135. It expects that to double in the coming monthand said it was on track to inform customers of decisions withinthe 12 month deadline.
HSBC also said it had plans in place to enable it to meetthe deadline.
The FCA however said banks had failed to meet a target tosend out at least 1,000 offers of compensation in October, withthe number sent out closer to 800.
Data from the FCA showed differing rates of progress indealing with cases between the banks. HSBC has reached the"redress offer and acceptance" stage for 436 sales, comparedwith 325 at Barclays, 205 at RBS and 135 at Lloyds.
The FCA data also showed majority state-owned RBS to havemore claims under review than HSBC, Barclays and Lloydscombined. RBS is assessing 9,728 cases, compared with 3,371 atBarclays, 3,296 at HSBC and 1,936 at Lloyds.
RBS has set aside 750 million pounds for compensation so far- far less than Barclays' 1.5 billion, which is the biggestprovision of all the banks. HSBC has set aside 460 million andLloyds has set aside 400 million.
