The mis-selling of payment protection insurance (PPI) went on for longer than it should have done, the Financial Services Authority (FSA) has admitted.

The insurance is supposed to provide cover for people unable to repay loans and credit card bills due to an accident, illness or unemployment.

But campaigners argue that many have been mis-sold to consumers who do not need them and often cannot claim, and 20 firms so far have been fined about £12 million as a result.

The sale of PPI policies has been surrounded in controversy after apparent widespread mis-selling of the insurance has emerged over the past two years.

FSA chief executive Hector Sants told a Treasury Select Committee hearing that "progress made by firms in sorting out the issue has been disappointing", and that "firms altering their behaviour has been slow".

The FSA was appearing before the cross party group of MPs as part of a hearing on the work of the City regulator.

Credit card company Egg was recently fined £721,000 and told to compensate customers who had been mis-sold the policies. It may have to pay out £17 million if every customer claims a return on their premiums.

Meanwhile, Mr Sants said that measures adopted so far to recapitalise banks may not be the last amid the economic downturn.

He said the moves to increase bank regulatory capital ratios was not a permanent policy change, and agreed with Bank of England governor Mervyn King that capital buffers may even need to come down to help get banks lending.

Copyright © Press Association 2008