ANZ Bank New Zealand announced the payment in its latest Quarterly Disclosure Statement.

“In December 2013, the Bank reached a conditional agreement with insurers to settle its claim in relation to the Bank’s former involvement in the ING Diversified Yield Fund and the ING Regular Income Fund for payment of AUD85 million, subject to taxation,” the bank said.

The funds were managed by ING New Zealand, which was jointly owned by ANZ and ING, a Dutch banking giant.

Attracting a combined $700 million from about 15,000 investors before they were frozen in March 2008, the funds invested in collateralised debt obligations (CDOs).

These securities, which pooled together mortgages, loans and other types of financial assets, were popular before the financial crisis but took a severe hit when the US subprime mortgage market collapsed.

In 2009 ING made a compensation offer totalling more than $500 million including a buy-out of units that saw investors in the diversified yield fund receive 60c in the dollar while those in the regular income fund received 62c.

This was followed by a further $45 million settlement with the Commerce Commission, which had been investigating the frozen funds.

The Commission found the promotion of the degree of investment risk in the funds had been “misleading” and it had enough evidence to prosecute ANZ and ING for breaches of the Fair Trading Act.

But the Commission decided the settlement would be the better outcome for investors.  ANZ, then ANZ National, faced a maximum fine of $200,000 under the Act.

ANZ accepted the settlement even though it disagreed with some of the Commission’s findings.  However, it accepted some of the advice from its advisers about the funds wasn’t at an appropriate level.

Following the frozen fund fiasco, ANZ bought out ING’s 51% holding in ING New Zealand for $A1.76 billion in September 2009.  One year later it was renamed OnePath.  OnePath was renamed ANZ New Zealand Investments last year.