(1888PressRelease)
November 18, 2008 - London, The company announced that the US Federal Reserve has granted the permission for it to convert into a bank-holding company. The Fed waived the normal 30-day waiting period on the application to grant Am EX and American Express travel related services to become bank holding companies.
As a full-fledged bank, the credit card giant will have now access to the Fed’s current and future bank-rescue packages and the opportunity to grow its deposits to broaden “funding sources”. However the newly formed bank-holding company would also be subject to greater scrutiny by regulators.
“Given the continued volatility in the financial markets, we want to be best positioned to take advantage of the various programs the federal government has introduced or may introduce to support U.S. financial institutions," said Kenneth Chenault, AmEx CEO, in a public statement.
As the US credit card company grapples with frozen capital markets- its primary source of financial support, the absence of a large deposit base makes it more vulnerable to funding disruptions.
While approving the move the Fed wrote, “The record indicates that consummation of the proposal would create a stronger and more diversified financial-services organization and would provide the current and future customers of Amex, Amex Travel and Amex Thrift with expanded financial products and services."
"Based on all the facts of record, the board has concluded that consummation of the proposal can reasonably be expected to produce public benefits that would outweigh any likely adverse effects," the Fed added.
The announcement comes in the midst of 24 percent drop in AmEx’s third-quarter profit as it wrote off about 5.9 percent of credit card loans. In the last month, the credit card company slashed 10% of its work, put a freeze on hiring, cut expenses and scaled back business development initiatives.
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