Amex gains commercial bank status

American Express plans to cut costs because of the economic slowdown

Credit card firm American Express has gained approval from the US Federal Reserve to become a commercial bank, enabling it to take deposits.

The central bank allowed the change for the firm and its affiliate American Express Travel because of the "unusual" situation in the financial markets.

The change means both entities will have access to Fed funding.

Recent upheaval in finance markets has led other firms to switch status to improve their outlook.

"The Federal Reserve board has determined that emergency conditions exist that justify expeditious action on this proposal," said the central bank after allowing Amex to change status.

The move also means Amex will be regulated by the Fed. In exchange it wants "greater access" to government-sponsored financial aid.

Changing Wall Street

Amex said becoming a bank holding company would give it "maximum flexibility and stability in this challenging economic environment".

Amex has been hit as more customers have trouble paying bills.

In September, the company revealed plans to reduce 10% of its workforce - about 7,000 jobs - and freeze certain salaries, to reduce costs.

The latest move comes amid huge changes taking place in Wall Street.

Investment banks Goldman Sachs and Morgan Stanley have been allowed to change their status to become bank holding companies, allowing them access to Federal Reserve funding.

The change was seen as way for the banks to strengthen their positions following the recent financial turmoil, which led to the collapse or merger of other institutions.

Both firms had been seen as key independent investment banks on Wall Street, but there were fears that without support from the Fed their prospects were uncertain.