Slump in foreign exchange contracts traded in Ireland

The daily amount of foreign exchange contracts and interest-rate derivatives traded in Ireland has plunged in the past few years.

The trend is understood to have been driven by Bank of America Merrill Lynch, once the largest bank in the country, moving most of its balance sheet to London in recent years.

Data published by the Central Bank on Friday shows that the average daily turnover of foreign-exchange contracts in Ireland fell 78 per cent to $2.2 billion (€2bn) in the three years to April.

For interest-rate derivatives, average turnover dropped to $1.1 billion per day from $2.9 billion over the same period.

“While some of this is due to declining business by reporting institutions, the data was also heavily influenced by significant institutions withdrawing from Ireland or closing their desks in Ireland,” the Central Bank said.

A spokesman for the bank declined to name individual banks.

Irish market

The most significant development in the Irish market during this period was Bank of America’s unit in Dublin,

Merrill Lynch International Bank

, shifting its half-a-trillion-euro financial derivatives portfolio to London.

The unit began moving assets from Ireland to the UK in 2013 as part of a move to simplify its company’s structure as most of the derivatives contracts were created and booked in the UK.

A derivative is a contract between two parties linked to the future value or status of the underlying asset to which it refers, including interest rates or the price of stocks or commodities.

At its height in 2013, Merrill Lynch International Bank had $593 billion of assets, making it by far the largest bank based in Ireland – three times the size of Bank of Ireland. The business stemmed from Bank of America's takeover of Merrill Lynch at the height of the financial crisis in 2008, in the same weekend that Lehman Brothers collapsed.

Irish participants

Other banks to drop off the list of Irish participants in the foreign exchange and interest-rate derivatives market survey in the past three years include German lender Heleba and Dutch-owned

Rabobank

International.

Meanwhile, trading in foreign exchange markets globally averaged $5.1 trillion a day in April, down from $5.4 trillion in 2013. Turnover in interest rate derivatives rose to $2.7 trillion from $2.3 trillion over the same period