Three banks facing potential legal action from the competition watchdog over their sale of interest rate swap contracts to farmers say they will continue to co-operate with the commission.
The Commerce Commission said today it intends to file proceedings against ASB Bank, ANZ Bank New Zealand, and Westpac New Zealandin March next year, and is also looking at other institutions which sold the swaps.
Commission chairman Mark Berry said it had told the banks it thinks there is sufficient evidence they breached the Fair Trading Act, citing sections of the act relating to misleading and deceptive conduct generally, misleading conduct in relation to services, and false or misleading representations.
"We have advised the banks of our views that swaps were misrepresented to rural customers," Berry said. "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."
The swaps allow clients to manage the interest rate exposure on their borrowing and are typically marketed to large corporations and institutions. However, from 2005 banks began marketing them to their rural and commercial clients.
The commission began its probe in August last year and has received 42 complaints since concerns over the way the financial derivatives were sold first aired in the media.
A spokesman for ANZ Bank said the issue related to some rural interest rate swaps mostly sold by The National Bank to large farming enterprises prior to the Global Financial Crisis when international events led to interest rates suddenly dropping by unprecedented levels.
"Immediately following the global financial crisis we worked with our customers, including many farmers, who found themselves in challenging financial circumstances."
The spokesman said ANZ remained committed to working with its customers and would continue to work with the commission on the historical rural interest rates swap issue.
A statement from ASB said it was unable to comment on the commission's claims other than to say ASB understands that the Commission's concerns relate to historic transactions.
"ASB will continue to cooperate with the Commission's on-going investigation." While Westpac said it would be seeking details as to the nature of the commission's specific concerns.
"It is difficult for Westpac to respond given the generality of the Commission's statements and the absence of any specific information from the Commission regarding Westpac's activities. Westpac will also be seeking details as to the nature of the Commission's specific concerns.
"Should proceedings be brought against Westpac, they will be vigorously defended." The regulator said it would make no further comment because of the pending court proceedings.
