• Market waiting for regulator update on rate swaps probe
•Decision on bank swaps next month
The commission's probe into ANZ focused on whether the bank marketing of interest rate swaps mislead customers as to their benefits and risks.
"The Commission considers that ANZ's behaviour led some customers to believe that margins on the loan connected with the swap would not change, early termination amounts would be similar to break costs for equivalent fixed rate term loans, and that swaps would be for them a good substitute for a fixed rate term loan. In reality, ANZ could, and in some instances did, increase margins, and early termination amounts could be significantly higher," Commission chairman Mark Berry said today.
"We are also pleased that ANZ has put its hand up and admitted that some of its conduct was misleading," he said.
The regulator pointed out that its conclusions had not been tested in court and that ANZ did not accept them.
The commission said last year it expected to file legal action against ANZ, ASB and Westpac banks over their sales of interest rate swap contracts to rural customers.
It said this morning that discussions with ASB and Westpac are ongoing.
The swaps are a financial derivative product that allows borrowers to manage the interest rate exposure on their borrowing.
They are usually offered to companies, but the commission said that from 2005 some banks offered them to rural customers throughout New Zealand.
See this morning's Commerce Commission announcement here:
The FMA, in a concurrent announcement to the commission, said it considered that ANZ's conduct around the marketing of interest rate swaps to certain rural customers was misleading.
The market watchdog said ANZ does not accept the FMA's views.
"As part of the settlement agreement ANZ has provided the FMA with enforceable undertakings in relation to ANZ's future conduct. Specifically, the undertakings require ANZ to engage a third-party to review its processes and procedures for future sales and marketing of interest rate swaps and forex forward contracts," the FMA said.
ANZ Agri business managing director Graham Turley said today on the news that it pleased it was the first bank to have reached an arrangement with the two regulators.
"Over the past couple of years we've been working with the Commission and FMA to resolve outstanding historical issues with a small number of mainly former National Bank rural customers who have raised issues," he said.
"We've agreed to put a sum of money into a fund which the Commission will determine how to distribute. It will be administered by a third party and a significant amount of money will also go to help the good work of Rural Support Trusts. We had already begun a process several years ago to help many rural interest rate swaps customers disadvantaged by the changed interest rate environment after the global financial crisis.
Notwithstanding customers had access to, and often took legal and other professional advice before entering into their rural interest rate swaps, this arrangement with the Commission brings certainty and avoids years in the courts for everyone," Turley said.
See the full settlement agreement and enforceable undertakings here.
