7 May 2015

Prosecution 'would have done nothing'

2:07 pm on 7 May 2015

The Commerce Commission has told MPs that it chose settlements with some banks that sold interest rate swaps because it was the quickest, most stress-free option for farmers.

Cows in Rangiwahia, Manawatu.

Photo: RNZ / Alexander Robertson

The commission told the primary production select committee this morning that more than $8 billion worth of swaps were sold to thousands of farmers between 2005 and 2009.

Interest rate swaps, which act like a fixed-rate loan, were offered by some banks to farmers and other commercial customers to protect them from rising interest rates.

However, when the rates fell, farmers were locked into higher rates that they could only end by using an expensive buy-out option.

Complaints over how the banks marketed the swaps sparked an investigation by the Commerce Commission.

Its chair, Dr Mark Berry, told MPs he was confident it would have won if it had taken the banks to court, but he said it wouldn't have been the best outcome for farmers.

"We would have been successful in obtaining significant penalties but those amounts would have gone to the Crown, and would have done nothing to assist the farmers who were affected," he said.

He said the commission was comfortable the settlement amounts, which would go directly to affected farmers, were a "better, quicker and more certain" outcome than requiring farmers to prove their cases in court for compensation.

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