Press Release – New Zealand Labour Party
With affected farmers being warned by the banks not to talk its time Parliamentary scrutiny was given to the controversial issue of interest rate swaps, Labours Primary Industries spokesperson Damien OConnor says.Damien O’Connor
Spokesperson for Primary Industries
11 February 2013
Parliament urged to investigate rates swaps
With affected farmers being warned by the banks not to talk it’s time Parliamentary scrutiny was given to the controversial issue of interest rate swaps, Labour’s Primary Industries spokesperson Damien O’Connor says.
“Farmers are losing their farms as a result of hard-sell tactics by banks who have locked them into high interest rates they can’t escape unless they pay hefty break fees.
“But that’s not the worst of it. In order to get some financial relief, farmers have been forced to sign confidentiality agreements with their banks promising they won’t say anything about the deals.
“In simple terms, a swaps loan is a type of fixed rate loan, sold to farmers as a way to manage their interest rate risk. What many were not told was that the bank could increase its margins if they considered the farmer became high risk. So, when a drop in farm prices coincided with high interest rates, the banks added margins and reduced credit facilities. This has put some famers under huge financial pressure.
“Given the Commerce Commission is still deciding whether to investigate I have formally asked the Primary Production select committee to initiate an inquiry into the activities of some of the major trading banks between 2007 and 2009 – when farmers were actively encouraged by bank staff to sign up to these dodgy loans.
“Farmers are being let down by just about everyone associated with this. The select committee process provides the opportunity for both farmers and bankers to have their say, and for the rest of us to find out exactly what effect these banking products have had on rural New Zealand.”