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* 191,000 complaints in H1 2014 vs 327,000 H1 2013
* PPI complaints down to 134,000 from 266,000
LONDON, Sept 2 (Reuters) - The number of complaints against British banks fell by nearly 42 percent in the first half of 2014, driven by a decline in the number of cases relating to the mis-selling of loan insurance, the Financial Ombudsman Service said on Tuesday.
The ombudsman, which steps in when banks and their customers cannot settle a dispute, said it received 191,000 new complaints during the period, compared with 327,000 in the same period the previous year.
Complaints about payment protection insurance (PPI) fell to 134,000 from 266,000 in the same period last year but still accounted for seven out of ten cases.
PPI policies were meant to protect borrowers against sickness or unemployment but were often sold to those who did not want or need them, resulting in Britain's most expensive consumer scandal.
Banks have already set aside 22 billion pounds ($37 billion) for compensation and Britain's financial regulator last week ordered them to re-open two and a half million cases from 2012 and 2013 in which claims may have been unfairly rejected or too little compensation may have been paid.
Chief Ombudsman Caroline Wayman, who was appointed in July, said that responsibility for sorting out the mass mis-selling of PPI remains a major part of the ombudsman's workload.
"We're seeing more and more people turn to us in frustration where they feel their bank or insurer simply doesn't understand or really care. And we're hearing growing dissatisfaction form people about being processed industrially as a number rather than being listened to as an individual customer," she said.
The number of complaints unrelated to PPI rose by 3 percent to 57,000. ($1 = 0.6015 British Pounds) (Reporting by Matt Scuffham; Editing by David Goodman)