1 Mar 2013

Interest rates swaps inquiry progress report

7:18 am on 1 March 2013

The Commerce Commision has told Parliament's Primary Production Select Committee it has so far received more than 40 complaints and interviewed more than 30 farmers in an investigation into interest rates swaps.

The commission began the inquiry in August last year into whether banks had misleaded farmer clients in marketing swaps.

Interest rate swaps are like a fixed rate loan that some banks offered farmers and other commercial customers to protect them from rising interest rates.

Some farmers who took up the option have complained that when the opposite happened. When interest rates fell, they were locked into the higher rates which they could not quit without paying an expensive buy-out option.

Commerce Commission chairman Mark Berry told the Select Committee briefing that more than a thousand hours have been spent on the investigation so far, but it's still at an early stage.

He was asked whether ter the inquiry might get to a stage where the Commission would seek compensation for farmers who suffered financial losses from interest rates swaps.

Dr Berry said the commission will widen its enquiries by seeking further information from people who entered into interest rate swaps.

Federated Farmers president Bruce Wills said he asked the Commerce Commission in November to look into the swaps complaints.

Mr Wills said the product itself is quite useful to a number of people and as a mechanism to control interest rate risk but he is concerned about how the product was sold.

He said it is complex and there has been some concern that some of the buyers of the product were not fully made aware of the risks involved.