Martin Wheatley, the FCA chief executive, made the admission in answer to a recent grilling at the Treasury Committee from North of Scotland MP John Thurso.
Now Bully-Banks, which has more than 2000 SME members, has said the FCA should demand "power to investigate the sale of hidden swaps with a view to establishing a scheme to review and provide redress to SMEs".
It also follows an apparent change of tack by the Financial Ombudsman Service, which last month provisionally upheld a hidden swap complaint by a Scottish hotelier against Clydesdale Bank, having originally rejected it.
The FOS is understood to be reviewing several similar complaints against the bank, the decisions on which are being watched closely by campaigners.
Clydesdale's fixed-rate tailored business loans, the bank's most widely-sold TBL, are excluded from the FCA's ongoing review, despite having been handled by regulated salesmen and containing what experts say are "embedded swaps" - a term actually used in one letter from the bank to a Scottish business.
Mr Wheatley told MPs that the fixed-rate TBLs were "not significantly different from swaps", and that there was a "potential gap in the regulatory structure".
Earlier this month the FCA reported that of the 29,789 cases in the review, only 32 had so far been settled, 15 months after the scheme was launched.
Jeremy Roe, chairman of Bully-Banks, said it was asking Parliament to ensure that the FCA "applies the necessary pressure and sanctions to bring the banks into line quickly, including fines where appropriate", and to redraw the definition of a sophisticated investor.
Mr Roe said 10,509 sales, or 39% of the total, had already been excluded from the scheme because the banks had assessed the customers as "sophisticated", despite the fact that the pilot review found 95% of all sales were mis-sales.
Mr Roe said these included garage-owners, manufacturers, retailers, care homes and property companies.
"The majority are ordinary businesses with no pretension to be financially sophisticated, without any knowledge of financial derivative products at the time they were mis-sold these toxic products by their banks."
He added: "The regulator knows the banks mis-sold these products by their thousand but has agreed with the banks to exclude more than 39% of the sales. That is a matter of profound concern."
Bully-Banks is also pressing for banks to pay out to SMEs as soon as redress has been agreed, rather than wait for the assessment of consequential losses. But the FCA has said it "understands" the banks' preference for a single final payment, including fines where appropriate.