11/11/2008

The Federal Reserve said it rushed approval of American Express' application to convert to a bank holding company because of "emergency conditions" and the financial markets' "unusual and exigent circumstances."

According to the Fed, AmexCo had $127bn in total assets but retail deposits of just $7.2bn – another sign that the financial crisis is

prompting regulators to accept bank holding applications from companies with little retail banking presence.

Bank holding companies get access to low-cost Fed lending facilities but have to submit to the stricter regulation and capital requirements demanded by the regulators.

American Express had already operated a commercial bank and a savings bank supervised by federal regulators. But the bulk of its assets were not in those institutions. As a bank holding company, these assets are now under federal supervision, a move that expands the amount of financing it can request from the government. That means the bank could qualify for up to $3.6 billion of the Treasury Department’s money, instead of just a small portion.

“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,” said Kenneth I. Chenault, the chairman and chief executive of American Express. “We will continue to build a larger deposit base to broaden our funding sources.”

Financial Times (11/11) New York Times 11/10