Westpac's deal with the commission follows similar settlements from ANZ and ASB. Photo / NZME.
Westpac's deal with the commission follows similar settlements from ANZ and ASB. Photo / NZME.
Westpac latest to settle, admits marketing of interest rate swaps likely to mislead or deceive some customers.
A probe into how three banks marketed interest rate swaps to farmers will see up to $24.2 million go back to rural customers and their communities, with Westpac following ANZ and ASB and settling with the Commerce Commission.
The result disappointed an advocate for affected farmers, some who lost their land after buying the swaps.
Westpac, in a settlement revealed yesterday, has admitted its marketing of interest rate swaps was likely to mislead or deceive some customers and the bank will now pay up to $2.5 million to 38 farmers after settling with regulators.
The bank will also pay $250,000 to rural support trusts and the same amount again for the commission's costs. Payments are likely to be distributed to the farmers who accept them by the end of July.
"Most of the farmers I've had personal dealings with, their losses - and some of them have wound up losing their farms completely - have been around the $2 million to $4 million mark," Walker said.
Westpac's $2.5 million payout for the 38 eligible farmers was, on average, less than $100,000 each, she said.
"It certainly doesn't mitigate the whole loss to most farmers, not by a long stretch."
The commission - which investigated Westpac's conduct around the swaps and negotiated a settlement with the bank - said the payment was in the order of what it could have recovered if there had been a successful trial.
Between 2005 and 2009, a number of New Zealand banks marketed and negotiated the swaps, which are a financial derivative product that allow borrowers to manage the interest rate exposure on their borrowing.
The commission was of the opinion that Westpac's behaviour gave some customers the impression that margins on interest rate swaps loans would not change.
But the regulator said yesterday that the bank could, and in some cases did, increase margins.
It certainly doesn't mitigate the whole loss to most farmers, not by a long stretch
The commission said that Westpac's behaviour was misleading and was likely to have breached the Fair Trading Act. While the bank denied all of the allegations, it admitted that between October 2005 and August 2008 it breached the Fair Trading Act.
It admitted that some of its conduct was likely to mislead or deceive some customers because it represented that their swap arrangements fixed the cost of borrowing, when in fact the margins on the loans underpinning the swaps could increase. The bank does not admit that any customers suffered or was likely to suffer any loss from its actions.
