According to a Financial Times report,
Bank of America Corporation
) has started transferring its derivatives operation worth more
than $50 billion from Ireland to its UK subsidiary. The move is a
part of BofA's restructuring initiative to improve overall
efficiency and focus on core operations.
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Financial regulators of both Ireland and UK are enthusiastic
about such a shift. While Dublin-based regulators are wary of the
presence of huge derivatives operations in the country, which are
posing a threat to its tax payers, regulators in UK want to have
a strong regulatory control over BofA's European operations.
This move would facilitate BofA to benefit from tax breaks
arising from the accumulated losses in UK operations. Earlier,
many financial firms routed European operations through Dublin as
Ireland offered significantly low corporate tax rate. However,
this tax rate advantage is gradually loosing ground as UK has
been lowering the same. Additionally, another tax rate cut to 23%
from the present 24% is expected in April.
Further, as per the company's latest disclosures, BofA has more
than $8 billion of deferred tax assets (DTAs) in UK. The company
can offset profit to lower or totally eradicate its corporate tax
bill from these DTAs. Also, there is additional pressure on BofA
to fully utilize DTAs as these will not qualify as core capital
under the still-to-be-implemented Basel III capital regulations.
The process of this reallocation is expected to be completed by
the end of this year. Yet, these are subject to regulatory
approval and the amendment of client contracts. BofA will
continue to have its corporate banking and cash management
businesses in Ireland.
Over the last two years, BofA has eliminated or divested many of
its non-core/unprofitable businesses across the globe. This
enabled the company to stabilize balance sheet and strengthen the
capital ratios. Further, the company's non-interest expenses have
declined nearly 6.5% year over year to $72.1 billion in 2012.
Apart from BofA, many other global banks including
HSBC Holdings plc
Deutsche Bank AG
Credit Suisse Group
) are also restructuring operations across the globe in order to
Currently, BofA retains Zacks Rank #3 (Hold).