Britain's biggest banks could be facing a bill running into billions of pounds for the latest mis-selling scandal to hit the industry.
The city regulator, the Financial Services Authority, has been investigating interest rate swaps, a complex financial product which was supposed to protect businesses against rising interest rates.
Instead, they left many customers in dire financial straits with heavy debts.
The FSA has revealed that more than 90% of interest rate swaps were possibly mis-sold to small businesses.
On Wednesday, Sky News City Edtior Mark Kleinman revealed that the City regulator had set out a revised framework for small business enterprises (SMEs) to pursue possible redress.
The swaps were traditional variable rate loans combined with complex interest rate movement bets that were sold on by banks' investment divisions for massive profits.
The unregulated swaps were promoted as a type of insurance at "no cost" to shield small businesses against adverse interest rate changes, but subsequently became major liabilities.
Britain's scandal-hit banking industry now faces another hefty compensation bill after the review of the complex products.
The FSA said a significant proportion of the 173 cases examined were likely to result in redress being due to the customer.
The potential scale and cost of the new scandal comes in the wake of mis-selling of payment protection insurance - known as PPI - to homeowners.
Banks have prepared to payout more than £10bn over the PPI scandal.
It is thought that as many as 40,000 of the interest rate swaps could have been mis-sold to small businesses since the end of 2001 after the FSA highlighted "serious failings" in the sale of the products last summer.
The FSA announced that the UK's four big banks - Barclays (LSE: BARC.L - news) , HSBC (LSE: HSBA.L - news) , Lloyds and Royal Bank of Scotland (LSE: RBS.L - news) - have agreed to start work on reviewing individual sales and providing compensation.
It expects to confirm by February 14 that these banks can launch their own reviews.
Martin Wheatley, chief executive designate of the Financial Conduct Authority, said he hoped the FSA's actions will ensure a fair and reasonable outcome for small and unsophisticated businesses.
He added: "Small businesses will now see the result of the review as the banks look at their individual cases.
"Where redress is due, businesses will be put back into the position they should have been without the mis-sale. But it is important to remember that this review is firmly focused on the particular circumstances of each sale.
"These will determine whether there were failings in the sales process and, if so, whether redress is due."
It is thought the cost of compensating businesses could total as much as £1.5bn across the sector, with Barclays, HSBC and RBS having already set aside around £630m to cover potential claims.
The FSA has now released new guidelines for banks to differentiate between sophisticated firms that knew what they were buying and small firms which did not understand the products.
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