Media Releases

Settlement payments completed in interest rate swaps case

7 October 2015

The Commerce Commission has completed administering the payment funds established by the settlements in the interest rate swaps investigations, with over $22 million now paid to complainants and rural charities.

The Commerce Commission investigated ANZ, ASB and Westpac banks for their marketing, promotion and sale of interest rate swaps to rural customers between 2005 and 2012. As a result of settlements reached with the banks, nearly $20 million has been paid to eligible customers with an additional $2.5 million paid to 14 regional Rural Support Trusts and the Dairy Women’s Network.

Payment to the charities was agreed in each settlement to support the rural community as a whole on account of rural customers of ANZ, ASB and Westpac who were not complainants in the case. Altogether the 14 Rural Support Trusts received $2.3 million from the ANZ and Westpac settlements, and the Dairy Women’s Network received $250,000 from ASB’s settlement.  

Of the cash settlement offers sent to complainants, over 97 per cent were accepted. A small proportion of customers who were not offered a cash payment, as their settlement was to be offset against recorded debt, declined the offer or did not respond. The overall acceptance rates are outlined for each bank in a table below.

Chair Dr Mark Berry said the Commission had negotiated strongly to secure payments from the banks for as many complainants as possible and was pleased with the high acceptance rate.

“Being able to deliver the payments now, compared with farmers otherwise facing lengthy and uncertain court proceedings, is a good outcome.  We are happy to say the settlement process has been completed and we are pleased to see that charities that assist farmers in difficult circumstances are receiving a meaningful benefit from this case,” Dr Berry said.

The completion of payments concludes the Commission’s involvement in this case.

Background

What are interest rate swaps?

Interest rate swaps are a financial derivative product that allows a borrower to manage the interest rate exposure on their borrowing. They were typically provided to large corporate and institutional customers, but from 2005 they were offered by various banks to some rural customers throughout New Zealand.
 
In August 2012 the Commission began enquiring into whether interest rate swaps were misleadingly marketed from 2005 to 2009. On 17 December 2013, the Commission announced that it had advised three major New Zealand banks (ANZ, ASB and Westpac), that it intended to issue legal proceedings in March 2014 over their sales of interest rate swap contracts to rural customers. Settlements were agreed in December 2014 with ANZ and ASB, and January 2015 with Westpac. The settlement process involved timeframes for offers to be made, considered and accepted, leading to a likely September 2015 payments completion date.
 
Further information on the investigation can be found here.

What was the acceptance rate for each bank?   

 

 Bank

 Offers sent

 Cash settlement
 acceptance rate %

 Overall
 acceptance rate %

ANZ

175

99

95

ASB

40

97

83

Westpac

38

97

69

What payments have each bank made under their settlement?   

 

 

$ million

Total payments made
(including offset against debt)

Rural charity payments

Commission
costs

Total $ million
 

ANZ

16.8 

2.1

0.5

19.3

ASB

2.7

0.25

0.25

3.2

Westpac

2.5

0.25

0.25

3

Total

21.9

2.6

1.0

25.5

Can those who declined to accept offers take private action against their bank?

That is a decision for each individual to make. The Commission has no role in any further legal action.  

Can a complainant who has accepted an offer join further legal action?

No. The terms of the settlement include agreement that acceptance of the offer means the individual claim has been legally concluded.

What Rural Support Trusts have received money under the settlements?

The 14 regional Rural Support Trusts that have each received $165,000 are: 
 

  • Northland
  • Waikato
  • Bay of Plenty
  • East Coast
  • Taranaki
  • Wanganui
  • Manawatu
  • Nelson- Marlborough
  • West Coast
  • North Canterbury
  • Mid Canterbury
  • South Canterbury
  • Otago
  • Southland