Hundreds of jobs at risk due to new US laws on prop trading
HUNDREDS of Irish jobs may be at risk as American banks are forced to comply with new banking laws in the United States.
As part of 'Wall Street reform', as the moves have been called, the big investment banks are being forced to hive off, or close down, their proprietary trading operations, possibly leading to redundancies among Irish support staff.
'Prop trading', as it is known, involves banks using their own money to trade a variety of securities for their own profit.
The business has been blamed by politicians and academics for precipitating the global financial crisis. Lehman Brothers, the Wall Street investment bank that collapsed in September 2008, was brought down in part by its prop trading operation losing huge bets on the property market.
While there are few traders based in Ireland, many of the staff employed by American banks here work as support teams for prop traders across the globe. As those traders are redeployed or laid off, the fear is that hundreds of Irish support staff will become surplus to requirements.
Bank of America Merrill Lynch, Citibank, and JP Morgan, which employ more than 3,500 people in Ireland, all declined to comment. Many firms use their Irish operations for fund administration and other businesses, but operations related to prop trading are believed to play a significant role in US banks here.
Under the new laws, the so-called 'Volcker rule' bans proprietary trading and limits the capital that banks can put into in-house hedge funds and private equity groups.
The hope is that the rule will force banks to reduce the risk they take on and focus on serving clients rather than their own interests.
Although financial institutions have years to comply with the law, it is believed that most of the major firms are looking at shutting down their operations much earlier.