Merrill Lynch's advisory relationship with both Royal Bank of Scotland (RBS) and Allied Irish Banks (AIB) has helped foster early stage takeover between Scotland's largest bank and the Irish mortgage bank hit by suspected currency fraud.

AIB is understood to have appointed Merrill two weeks ago, within days of revelations that it had lost nearly $700m (€800m) form suspected currency fraud at its Allfirst unit in the US. The company's share price dipped 18% and rival UK banks began circling the Irish bank as a takeover target.