Bank of America starts moving derivatives from Ireland to UK: reports

Bank of America has started moving $50 billion (£32 billion pounds) worth derivatives out of its Ireland-based operations into its British subsidiary, according to a report in the Financial Times website yesterday. The report cited people close to the operation.

Derivatives are securities whose price is dependent upon or derived from one or more underlying assets. The derivative is basically a contract between two or more parties with its value determined by fluctuations in the underlying asset. Among the most common underlying assets are stocks, bonds, commodities, currencies, interest rates and market indices.

According to the report, the move would allow the world's 10th biggest bank by assets to benefit from tax breaks stemming from accumulated losses at its UK business.

The newspaper said Irish officials were not comfortable with the scale of the business being moved, as it posed a theoretical risk to Irish taxpayers.

It added UK regulators were also keen to have closer control over European operations of the bank, which had its operational management based in London.

A huge chunk of the Bank of America's European business, including cash management, corporate lending and derivatives, was routed through its Dublin subsidiary, the report added.