The British financial regulator on Thursday said the country's large retail banks have been asked to start a full review of their sales of interest rate hedging products (IRHPs) to small businesses.

The Financial Services Authority (FSA) said the review would include Barclays, HSBC, Lloyds and RBS bank.

The announcement means the banks will review individual sales and provide redressal to customers based on outlined principles, the FSA said.

The decision follows intensive work by the regulator to scrutinize the pilot review of sales carried out by banks and independent reviewers.

After looking at 173 sales to non-sophisticated customers, it was found that over 90 percent of the sales did not comply with at least one or more regulatory requirements. "A significant proportion of these 173 cases are likely to result in redressal being due to the customer," FSA said in a statement.

"We believe that our work will ensure a fair and reasonable outcome for small and unsophisticated businesses," said Martin Wheatley, CEO designate of the Financial Conduct Authority, which is due to take over responsibilities from the FSA this year as part of reorganization of banking supervision in Britain.

"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 missale," Wheatley said.