Bank of America has reportedly contracted its derivatives business in Ireland by $169 billion (123 billion) over the past two years as it shifted contracts to London to simplify its accounting practices.
This contraction has slashed the Irish-based bank’s total assets by $187billion to $406 billion over the two years, reported Bloomberg.
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In addition, the move comes as part of the the bank’s plan to simplify its structure. Most of the bank’s derivatives were created and booked by the London office.
In Dublin, Merrill Lynch International Bank’s derivative contracts decreased to $368.6 billion on 31 December from $537.3 billion at the end of 2011.
According to the Irish accounting standards, banks will have to report derivatives assets and liabilities separately on a gross basis, irrespective of of any legally binding agreements between parties to a contract to setoff, or net, their exposures in the case of a bankruptcy.
A derivative is a deal between two parties related to the status of the underlying asset, including interest rates or the price of stocks or commodities.
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By GlobalDataBofA has considered its Irish unit as its primary non-US banking entity and one of four foreign subsidiaries identified as material entities, according to filings with the Federal Deposit Insurance Corporation.
