Wall Street banks are drawing up preliminary plans to move some London-based activities to Ireland to address concerns that the UK is drifting apart from the EU.
People familiar with Bank of America, Citigroup and Morgan Stanley told the Financial Times that they considered Ireland a favorable location for some of their European business if they needed to move them out of the UK. One said he was already planning to move some activities to Ireland.
The people said their plans were in most cases still at very early stages. But they said the US banks had started preparing for the euro zone's impending banking union that threatens to isolate Britain and, ultimately, for a possible UK exit from the EU.
"I'm frankly looking at moving some activities to Ireland," said one senior UK-based manager at a Wall Street bank. "I think the Irish central bank and government would welcome this. It is not so much Brexit, more about legal entity optimization."
Most US and Asian banks have chosen to base their main European operations in the UK, giving them an automatic passport to carry out their services across all 28 countries in the EU.
But senior US banking executives said the UK was unlikely to be granted the same "passporting" rights if it left the EU – the so-called "Brexit" scenario. Prime Minister David Cameron has promised to hold a referendum on a renegotiated EU membership if his Conservative party wins next May's election.
Executives at American banks in Europe are reluctant to speak publicly about the issue for fear of upsetting the UK regulators. One said: "I don't think people are making enough of it – a lot of passported activities that cannot take place in London will not exist here any more."
As the European Central Bank prepares to take charge of the biggest banks in the euro zone later this year, there are fears among some executives at US banks that this will drive a wedge between the UK and the rest of Europe's financial system.
Britain is already challenging an ECB policy in the European Court of Justice that would force clearing houses handling euro-denominated transactions to decamp from London to the euro zone.
The UK hosts more than 250 foreign banks and last year it generated a financial services trade surplus of $71 billion, about a third of which came from trade with the EU, according to TheCityUK, a financial lobby group.
Most observers assume that if the UK did leave the EU then Frankfurt or Paris would be the most likely alternative for US banks looking to shift parts of their European activities out of the UK.
But Ireland's attractions for US banks include its low corporate tax rate, English speaking population, English-style legal system and euro zone membership. "Dublin is selling itself very hard at the moment," said one banker.