The Commerce Commission, a New Zealand-based competition enforcement and regulatory agency, is to take legal action against three New Zealand banks for selling interest rate swap contracts to rural customers.
The three banks are ANZ Bank New Zealand (ANZ), ASB Bank (ASB), and Westpac Banking and Westpac New Zealand.
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Interest rate swap is a financial product that allows a borrower to manage the interest rate on his/her borrowing.
Usually, the interest rate swaps are offered to corporate and institutional customers, however, various banks started offering them to rural customers from 2005.
The Commission, which began enquiry into misleading marketing of interest rate swaps in 2012, found that the three banks have breached sections 9, 11 and 13 of the Fair Trading Act.
Commerce Commission chairman, Dr Mark Berry, said the Commission aims to file proceedings in March 2014.
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By GlobalData"This has been a very extensive and complex investigation, but that phase of it is almost at an end. We have advised the banks of our views that swaps were misrepresented to rural customers," Dr Berry added.
The Commission is also investigating other institutions, who might have sold interest rate swaps.
