Yesterday, the Federal Reserve Board approved applications by American Express Company, one of the nation’s largest issuers of credit cards, and its subsidiary, American Express Travel Related Services, to become bank holding companies upon the conversion of American Express Centurion Bank (AMEX Bank), Salt Lake City, Utah, to a commercial bank. AMEX Bank currently operates as a federally insured industrial bank that is exempt from the definition of “bank” under the Bank Holding Company Act.

The Federal Reserve’s approval represents further reshaping of the financial services industry and follows the moves of the nation’s remaining large investment banks, Goldman Sachs and Morgan Stanley, which received Federal Reserve approval to become bank holding companies in September. The Federal Reserve approved American Express’ application on an expedited basis, announcing that “emergency conditions exist that justify expeditious action on [the] proposal.”

American Express’ Chairman and CEO, Kenneth I. Chenault stated that “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. We will continue to build a larger deposit base to broaden our funding sources. With Federal Reserve oversight we should gain greater access to the capital on offer under the current and any future government-sponsored programs.” He emphasized that the move would not fundamentally change American Express’ core focus on the payments industry or require significant divestitures. The press has generally reported that the company’s primary motivation behind the conversion was access to Treasury’s bailout funds.

While, as a bank holding company, American Express will be able to apply to obtain equity capital from Treasury under the Capital Purchase Program and issue short and medium-term debt that would be guaranteed by the FDIC under its Temporary Liquidity Guaranty Program, American Express presumably would have already been able to participate in those programs by virtue of its status as a savings and loan holding company. American Express already owned a trust-only federal savings bank, American Express Bank, FSB, Salt Lake City.