The UK's chief banking regulator has lambasted the "dreadful record" of banks on the mis-sale of complex loans to businesses.

Andrew Bailey, the Bank of England deputy governor, told the Treasury Committee the history of banking behaviour meant he would be looking closely to see if they bent new rules intended to prevent any recurrence of the interest rate hedging product (IHRP) scandal.

"But there is an underlying need amongst customers for hedging, it just needs to be properly done," Mr Bailey said. "We will have to be very vigilant about [future sales of hedging products by ring-fenced banks]."

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Bank of England Governor Mark Carney told MPs there had been clear malpractice and that firms' problems should not be viewed as an inevitable side-effect of low interest rates.

"This just goes right back into the mis-selling issue, and it's not a monetary policy issue," he said.

Banks have so far paid out £1.2billion in redress to small and medium-sized firms who were mis-sold IHRPs after a bank-led review overseen by the Financial Conduct Authority. They have made combined provisions of £3.75bn for the entire process but up to half will go on the costs of the review.