Banks fork out a total $25.5 million over interest rate swaps to farmers
By Fiona Rotherham
Oct. 7 (BusinessDesk) - The Commerce Commission has completed the distribution of $25.5 million to complainants and
rural charities after reaching settlements with banks who had marketed interest rate swap products to farmers.
The commission says nearly $20 million in cash has been paid to eligible customers while $1.9 million was offset by the
banks against debts some complainants owed to them. A further $2.5 million went to 14 regional Rural Support Trusts and
the Dairy Women’s Network and the commission received $1 million to cover a portion of its investigation costs,
including legal expenses. The bulk of the money came from the ANZ Bank New Zealand, which paid out $19.3 million in
total, $3.2 million from ASB Bank and $3 million from Westpac Banking Corp.
ANZ, ASB, and Westpac were investigated for their marketing, promotion, and sale of interest rate swaps to farmers
between 2005 and 2012. While the commission initially threatened legal action in March 2014, it ended up negotiating
confidential settlements with all three banks to pay a total $24.2 million in compensation, which eventually rose to
$25.5 million as some payments ended up being more than first anticipated.
The final deal with Westpac in February ended investigations by the commission and the Financial Markets Authority. A
total of 179 farmers had laid complaints with the commission.
Interest rate swaps are a financial derivative that allows the borrower to manage interest rate exposure on their loan.
They worked well for borrowers when interest rates were high but problems began when floating interest rates dropped
dramatically from late 2008 and farmers were then locked into high costs they couldn’t escape from without incurring
More than 97 percent of the settlement offers were accepted but a small number who were told the cash would be offset
against their recorded debt rather than paid out, either declined the offer or didn’t respond. ANZ put any left over
payment money towards what it paid rural charities while ASB is understood to have kept the residual amount which was
less than $20,000.
The settlement terms included agreement that acceptance of the offer meant individual claims could not be taken further
Commission chair Mark Berry said he 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,” he said.
When the negotiated settlements were announced earlier this year, Labour’s Primary Industries spokesperson Damien
O’Connor said the commission had proven as “useless as tits on a bull” because it failed to follow through with its
threatened legal action against the banks in favour of settlements that reinforced “the growing view that money buys
Other critics opined farmers would have likely got more compensation if legal action had gone ahead.
Janette Walker, a former farmer who negotiates with the banks over debt problems, estimated some $8 billion was lent on
the interest rate swaps to around 1500 farmers during the period investigated, at rates ranging from 9 percent to 12