A High Court judge has declared that ANZ breached the Fair Trading Act for misleadingly representing interest rate swaps to some customers.

Specifically, the bank understated some of the risks and overstated some of the benefits of the swaps arrangements, incoming Chief High Court Judge Geoffrey Venning said this morning.

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The declaration follows a negotiated settlement between the Commerce Commission and ANZ, after which the bank paid $18.5 million. These funds will be distributed to affected customers who complained to the regulator.

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Between 2005 and 2009, a number of New Zealand banks marketed and negotiated interest rate swaps, which are a financial derivative product that allows borrowers to manage the interest rate exposure on their borrowing.

The Commission in 2012 began probing whether these swaps were being misleadingly marketed and last year reached settlements with ANZ, ASB and Westpac over their behaviour.

ANZ was the first bank that settled and in doing so made narrow admissions that certain conduct was misleading to some affected customers.

Westpac paid $2.5 million in a similar settlement and ASB $3.2 million.

The Commission's alleged four of ANZ's representations to customers were misleading.

The first was whether the swaps fixed the overall cost of borrowing and the regulator said this was misleading because while they fixed interest, they did not fix the margin the bank charges.

ANZ has admitted that margins increased for some affected customers, the High Court heard today.

The second allegation is the bank represented break fees for the swaps were the same as those for fixed terms loans.

ANZ admits these fees were calculated differently and admits and that during the GFC this resulted in there being a significant gap between the two, the court also heard.

While the Commission also alleged customers were mislead over representations about the monitoring of the swaps and their suitability, ANZ denied this.

Following the settlement, ANZ applied to the High Court for a declaration the bank breached the Fair Trading Act.

This application came before Justice Venning this morning with the lawyer for the Commerce Commission, John Dixon, saying there was no suggestion the bank deliberately set out to mislead customers.

However, customers were mislead and the Commission believed ANZ "should have known better", Dixon told the judge.

Justice Venning said it was appropriate to declare that ANZ breached the Fair Trading Act.

The judge was satisfied that this declaration would be of practical utility.

"ANZ's marketing of the swaps is a matter of public interest.

"There is real interest in a court declaring that ANZ's conduct was in breach of the Act rather than that breach being acknowledged or admitted in a settlement reached between the parties," the judge said.

Apart from public censuring ANZ, the declaration would be material should the bank come back before the court for a further breach of the law.

It would also deter ANZ, other banks, or commercial entities from engaging in similar conduct and confirm to the public and commercial community the Commission is willing to move to enforce the law, Justice Venning said.

Approached for comment and ANZ spokesman said: "We're pleased the court stated that there was no intention to mislead over the sales of interest rate swaps, and also in court it was noted that the bank acted in good faith."