Some of Britain's biggest banks are facing a hefty compensation bill after the City watchdog said it found "serious failings" in the sale of complex financial products to small businesses.

Barclays, HSBC, Lloyds and Royal Bank of Scotland have agreed to compensate customers where the mis-selling of so-called interest rate swap arrangements (IRSAs) has occurred.

IRSAs are complicated derivatives products that may have been sold as protection - or to act as a hedge - against a rise in interest rates without the customer fully grasping the downside risks.

Banks sold around 28,000 interest rate protection products to customers since 2001.