ComCom defers action on interest rate swaps

Photo / Mark Mitchell

The Commerce Commission has deferred its call on whether to lay proceedings against three banks involved in its interest rate swaps investigation as it is assessing new information in the cases.

The regulator said in December that it anticipated filing legal action against ANZ, ASB and Westpac by March this year over their sales of interest rate swap contracts to rural customers.

These swaps, according to the commission, are a financial derivative product that allows a borrower to manage the interest rate exposure on their borrowing.

While traditionally offered to corporates, the commission says from 2005 they were offered by some banks to rural customers throughout New Zealand. In August 2012, the commission began looking into whether these interest swaps were misleadingly marketed.

Although last year it said it anticipated it would file proceedings against the banks by the end of March, the commission said today that this time-frame was no longer realistic.

The regulator sad it had been able to "actively advance its investigation since then" and used new powers to interview current and former bank staff.

"This is a particularly complex case where different facts and circumstances apply to each of the three banks involved. This complexity along with the new information that has been obtained meant that the original March time-frame was no longer realistic," the commission said this afternoon.

"The Commission now anticipates making a further announcement mid-year, once it has furthered discussions with each bank about the information it holds and any possible resolution of the Commission's concerns.

The Commission has entered into a 'standstill agreement' with each bank that means there will be no barrier to any proceedings brought by the Commission as a result of taking this extra time," the regulator said.