NZ watchdog denies back down on interest rate swaps case

New Zealand's Commerce Commission, which enforces the country's competition and fair trading laws, has denied it backed down from taking Westpac, ANZ and ASB to court in order to avoid legal costs.

Last month Westpac New Zealand agreed to a NZ$2.97 million settlement deal to end a Commerce Commission investigation into its marketing, promotion and sale of interest rate swaps to farmers between 2005 and 2012. This followed settlements with ANZ (NZ$18.5 million) and ASB (NZ$3.2 million) that were announced late last year.

Commission chairman Mark Berry appeared before parliament's commerce select committee yesterday keen to dispel suggestions that the Commission accepted the banks' settlement offers because of pressure on resources.

"We put the banks on notice that we were going to start proceedings and that then gave them the opportunity to raise with us whether they wanted to enter into settlement negotiations. If they hadn't, we had our pleadings ready to file and would have done so and we would have taken that case fully through the courts," Berry said.

He said the Commission's motivation for settling was to achieve the best outcome for the affected farmers.

"The thing that really swayed us in that case, and also the year before in the credit sales case, was giving some priority to the position of the affected consumers," Berry said.

"The dilemma we faced was that if we had taken a prosecution it would have been in the courts for three to five years, any penalty awarded would have gone to the Crown and the farmers would have been unlikely to have received any compensation. Their claims for compensation would have been out of time and also faced other potential difficulties," he said.

"When we became involved in the interest rate swaps the clock had been ticking for too long."

The Commission's CEO, Brent Alderton, said their litigation fund had a cap of "about NZ$9 million" and "we haven't threatened that, in recent years."

Asked by opposition Labour MP Kris Faafoi why the Commission's books showed a NZ$5 million reduction in legal and professional fees, Alderton said: "We would have budgeted to take Westpac, ANZ and ASB through to litigation. In the end we didn't have to do that, we settled, so that is why the fees were lower."