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FMA reaches settlement with ANZ over rural interest rate swaps

Page last updated: 3 Dec 2014

Media Release
MR No. 2014 – 043
3 December 2014

The Financial Markets Authority (FMA) said today it has reached a settlement with ANZ Bank New Zealand Limited (ANZ) regarding the sale, promotion and marketing of rural interest rate swaps to rural customers.

The settlement follows an FMA investigation into ANZ’s process for selling and marketing interest rate swaps to rural customers from 2005 to 2009, particularly focusing on requirements under the Securities Act 1978.

The FMA’s settlement agreement reached with ANZ is alongside a settlement also announced today between the Commerce Commission and ANZ.

The Commission has concluded its own investigation into ANZ’s sale and marketing of interest rate swaps. That settlement will see ANZ establish a payment fund of $18.5 million, to be used to make payments to eligible rural customers who registered their complaints with the Commerce Commission. ANZ has also agreed to make in-court civil admissions in relation to its conduct.

The FMA considered that ANZ’s conduct relating to the sale and marketing of interest rate swaps to certain rural customers was misleading, with particular reference to:

  • statements that interest rate swaps were like fixed-rate loans, but more flexible
  • a failure to disclose a right to charge margins without any intervening event
  • a failure to disclose materially different early termination amounts for the swap agreement compared to a break fee on a fixed-rate loan.

ANZ does not accept the FMA’s views set out above and states further that it has various defences available to it.

As part of the settlement agreement ANZ has provided the FMA with enforceable undertakings in relation to ANZ’s future conduct. Specifically, the undertakings require ANZ to engage a third-party to review its processes and procedures for future sales and marketing of interest rate swaps and forex forward contracts.

The report from the third-party will be provided to ANZ and then to the FMA. Following consultation with the FMA, ANZ will implement the recommendations in the review.

The FMA’s Head of Litigation, Paul O’Neil, said: “This settlement reflects the FMA’s focus on members of the public receiving full and accurate information when purchasing financial products or services.

“As the undertakings relate to ANZ’s future conduct, the settlement recognises our role as the regulator of conduct in this area, and a commitment to achieve practical and effective outcomes requiring businesses to ensure their products are sold using acceptable practices and disclosure.”

Under the Financial Markets Conduct Act 2013, from 1 April 2014 the FMA has responsibility for regulating misleading and deceptive conduct in relation to any dealing in financial products or services.

The settlement agreement and enforceable undertakings are available here.


Shae Skellern
09 300 0465
021 847 192


Case: ANZ rural interest rate swaps - Settlement agreement/ Enforceable Undertaking