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Com Com proposes to issue proceedings on interest rate swaps

Commerce Commission proposes to issue proceedings on interest rate swaps

Issued 17 December 2013

Release No. 57

The Commerce Commission confirms that it has advised three major New Zealand banks, ANZ, ASB and Westpac, that it intends to issue legal proceedings over their sales of interest rate swap contracts to rural customers. The Commission has advised the banks that in its view there is sufficient evidence that they may have breached sections 9, 11 and/ or 13 of the Fair Trading Act (FTA), and that it wishes to place the matter before the Court for its decision.

Commerce Commission Chairman Dr Mark Berry says the Commission aims to file proceedings in March 2014.

“This has been a very extensive and complex investigation, but that phase of it is almost at an end. We have advised the banks of our views that swaps were misrepresented to rural customers. I expect to have more talks with the banks about these views, and about the different facts that might apply to each of them, over the coming months,” said Dr Berry.

“Because court proceedings are in prospect, the Commission will not be commenting further at this time.”

The Commission is also considering the conduct of other institutions that have sold interest rate swaps.

The Commission encourages affected swap customers to contact the Commission on 0800 943 600.   

Background

Interest rate swaps are a financial derivative product that allows a borrower to manage the interest rate exposure on their borrowing.

Interest rate swaps were typically provided to large corporate and institutional customers, but from 2005 were offered by various banks to rural customers throughout New Zealand.

In August 2012 the Commission began enquiring into whether interest rate swaps were misleadingly marketed from 2005.

This matter relates to ANZ Bank New Zealand Limited (ANZ), ASB Bank Limited (ASB), and Westpac Banking Corporation and Westpac New Zealand Limited (together, Westpac).

ENDS

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