* Firms have lobbied for agreement to be released
* Many firms unhappy with compensation process
* Tyrie says regulator took too long to co-operate (Adds comment from lawmaker Tyrie, swaps adviser)
By Matt Scuffham and Steve Slater
LONDON, Feb 12 (Reuters) - British lawmakers have published an agreement between banks and the financial regulator over how banks should compensate small firms mis-sold hedging products, potentially making it easier for businesses to pursue claims.
The Financial Conduct Authority (FCA) agreed the terms of a scheme to compensate thousands of small companies that were mis-sold complex products known as interest rate swaps in 2012 with nine banks including Royal Bank of Scotland, Lloyds Banking Group, Barclays and HSBC.
But it quickly attracted criticism with more than a third of businesses excluded from the scheme because they were deemed to be "financially sophisticated" and many of the firms that were allowed into it offered alternative hedging products by banks rather than cash compensation.
Parliament's Treasury Select Committee (TSC) published details of the agreement on Thursday after taking evidence from FCA Chief Executive Martin Wheatley on Tuesday.
Lawmakers had criticised the regulator for not releasing details of the agreement sooner.
"The FCA took far too long to cooperate and did so only after many requests and persistent pressure from the committee," TSC chairman Andrew Tyrie said.
Many firms and their advisers have complained that it is difficult to appeal decisions without being in possession of the original agreement.
Martin Berkeley, a senior consultant at Vedanta Hedging, which advises on interest rate hedging products, said the release of the original agreement would be welcomed by businesses pursuing compensation.
"It may potentially be able to help people. It's important clients have confidence in the process and the TSC has highlighted serious concerns," he said.
The products were meant to protect firms against rising interest rates, but when rates fell the companies had to pay extra charges, typically running to tens of thousands of pounds. They also faced hefty penalties to extricate themselves from the deals, which many said they were unaware of.
Banks set aside 4.4 billion pounds to compensate customers but have so far paid out just 1.8 billion pounds in compensation.
"The Committee remains very concerned that terms of the FCA's redress scheme may, in some cases, have provided banks with an opportunity not to provide meaningful redress. Many firms feel that this process has unfairly favoured the banks," Tyrie said. (Editing by Mark Potter)