This step will assist Bank of America, which is the world’s number 10th bank by assets, reap in some advantages from tax breaks arising from accumulated losses in its U.K. business.
Irish officials revealed that Bankers were facing discomfort from the scale of the business which posed a theoretical risk to the Irish taxpayers. Irish officials were uncomfortable with routing such a huge amount of derivatives business through Dublin.
The regulatory approval, which is in the process, and also the modification of client contracts process, will most probably be completed by the end of 2013.
Till now, the larger share of European operations like corporate lending, cash management and the derivatives book was being handled by the lender through the Irish subsidiary, primarily due to low taxes. The relocation will not affect its corporate banking and cash management businesses in Ireland
Bank of America Corp (NYSE:BAC), one of the largest banks in Ireland, acquired the operations, MLIB, after it took control of Merrill Lynch at the height of the financial crisis. Even though, its domestic Irish operations are small, it routes a large part of its European operations, including corporate lending, cash management and derivatives book, through the Dublin subsidiary.
During the boom in the financial industry, many of banks moved their operations to Ireland, to take advantage of the low tax. However, as the UK government slashes its corporate tax rate, with a further cut to 23 per cent planned in April, the tax advantage is now diminishing.
Bank of America Corp (NYSE:BAC) posted its fourth quarter earnings recently, in which it earned $732 million, or 3 cents a share beating estimates by a penny. For the full year, the bank earned just over $4 billion, or 25 cents a share. After accounting for the debt, fourth-quarter sales stood at just under $20 billion, down from last year’s $26 billion.
“We enter 2013 strong and well positioned for further growth,” said CEO Brian Moynihan in a statement, at the time of announcing the results.