The Lloyds Banking Group is implementing a case-by-case, two-step system to compensate customers mis-sold complex interest rate swap agreements.

Lloyds told IBTimes UK that it had told the Financial Conduct Authority (FCA) it would assess each claim individually to determine whether it would grant Britain's businesses redress payments before consequential losses were calculated.

Under the FCA interest rate hedging product review, no payments can be made until the entire process of determining redress is completed. This prevents a party being able to make claims over and over again and costing firms multiple sets of bills from fresh reviews.

The bank, which sold the contested product, firstly determines whether the IRSA has been mis-sold, with the help of an independent reviewer. It then calculates what redress to offer. The bank then offers the client a redress package, which can include anything from a refund of swap payments to a restructuring of a business loan at a better rate.

Consequential loss claims, which involves the party providing evidence that it incurred losses as a result of the IRSA, are filed separately.

This means that while a bank can make an initial redress offer - a product tear-up or switch and/or compensation - if a company is claiming for consequential losses on top of this, then it would have to wait until after the bank's have assessed the application for damages.

"We have confirmed to the FCA that we will, on a case by case basis for customers in financial distress, offer to pay any redress due in relation to historical payments before any consequential loss claim has been outlined by the customer and agreed with them," Lloyds told IBTimes UK.

"This will allow these customers, who are our priority in the review, to receive payments at an earlier stage, which we recognise can be helpful for this particular group of customers."

Interest rate swap agreements are contracts between banks and customers where typically one side pays a floating or variable rate of interest and receives a fixed rate of interest payments in exchange.

Such contracts are used to hedge against extreme movements in market interest rates over a given period. Companies that saw the value of these products move against them as rates fell during the recession now owe banks inordinate sums of money in yearly interest payments.

Despite the step forward to granting IRSA victims redress more quickly, it stops short of HSBC's landmark two-stage repayment system for all businesses.

The FCA's chief executive Martin Wheatley recently said: "I welcome the move to pay compensation in two stages. I've been urging the banks to consider what more they could do to ensure the small businesses affected by swap mis-selling get the compensation they're owed as quickly as possible. The announcements over the last couple of days are a good first step."