The Financial Services Authority said on Thursday the results of a study into the sale of complex interest rate hedging products to small firms by banks had found that the vast majority had been mis-sold.

The findings leave banks vulnerable to a wave of claims and could leave them facing billions of pounds in compensation claims, some derivatives experts have said.

The FSA said it found that, in over 90 percent of the 173 cases examined in the study, the sales did not comply with at least one or more regulatory requirement. It said a significant proportion of the cases will result in financial compensation being due to the customer.

(Reporting by Matt Scuffham; Editing by Steve Slater)