Bank of America has begun moving more than $50bn of derivatives business out of its Dublin-based operation and into its UK subsidiary, according to people close to the operation.



The move, part of the group's global drive to rationalize its operations, has been encouraged by regulators but will also allow BofA to benefit from tax breaks stemming from the accumulated losses in its UK business.

Bank of America, the world's number 10 bank by assets, is currently one of the biggest banks in Ireland. Although its domestic Irish operations are small, it has traditionally routed a large chunk of its European operations – corporate lending and cash management as well as the derivatives book – through the Dublin subsidiary. BofA inherited the operation, MLIB, when it acquired Merrill Lynch at the height of the financial crisis.

But bankers said Irish officials had made it clear they were uncomfortable with such a large book of business being Dublin-based, theoretically posing a risk to Irish taxpayers. At the same time UK regulators were keen to have closer control of Bank of America's European business, whose operational management is in London.

In the boom years many banks flocked to low-tax Ireland, routing Europe-wide business through Dublin. That tax advantage is now diminishing, as the UK cuts its corporate tax rate, with a further reduction to 23 per cent due in April.

The process of moving the assets, which requires further regulatory approval and the amendment of client contracts, is expected to take at least until the end of 2013. It will be most tax-efficient before April 5 because the value of the tax losses in the UK business will diminish in line with the falling corporate tax rate.