A further seven banks have agreed to review the sale of complex financial products to small businesses and compensate customers where evidence of mis-selling is uncovered, Britain's financial watchdog said today.

Allied Irish Bank, Bank of Ireland, the Clydesdale and Yorkshire banks, the Co-operative Bank, Northern Bank and Santander UK will review the sale of so-called interest rate swaps to small and medium enterprises (SMEs), the Financial Services Authority (FSA) said.

Interest rate swaps 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.

The move comes after Barclays, HSBC, Lloyds and Royal Bank of Scotland agreed to compensate customers after the FSA found “serious failings” in the sale of swaps to SMEs.