New Zealand's commerce watchdog announced Tuesday it will prosecute three major Australian-owned banks on charges of mis-selling controversial financial derivatives known as interest rate swaps to the nation's farmers.
The Commerce Commission said it had advised the ANZ, ASB and Westpac banks that it intended to issue legal proceedings under the Fair Trading Act over their sales of interest rate swap contracts to rural customers.
Commission chairman Dr Mark Berry said the commission aimed to file proceedings in March 2014 after a very extensive and complex investigation.
"We have advised the banks of our views that swaps were misrepresented to rural customers. I expect to have more talks with the banks about these views, and about the different facts that might apply to each of them, over the coming months," Berry said in a statement.
The commission was also considering the conduct of other institutions that have sold interest rate swaps, he said.
Interest rate swaps, a financial derivative product that allow a borrower to manage the interest rate exposure on their borrowing, were typically provided to large corporate and institutional customers, but from 2005 were offered to rural customers throughout New Zealand.
Federated Farmers president Bruce Wills said his organization wrote to the commission in November last year requesting a formal investigation into the selling of interest rate swaps.
"Some of the debt instruments sold to farmers have been highly complicated to say the least," Wills said in a statement.
Reports in recent years have said New Zealand farmers were losing their farms after being trapped in high-interest rates by the banks.