(AFP) – Nov 10, 2008
WASHINGTON (AFP) — The US Federal Reserve Monday authorized giving credit card giant American Express full status as a bank holding company.
The US central bank said that both American Express Company and its affiliate American Express Travel Related Services would be allowed to form bank holding companies, as the AMEX group converts its Salt Lake City, Utah-based American Express Centurion Bank into a full commercial bank.
"In light of the unusual and exigent circumstances affecting the financial markets, and all other facts and circumstances, the (Federal Reserve) Board has determined that emergency conditions exist that justify expeditious action on this proposal," the Fed said in a statement.
AMEX, with 127 billion dollars in consolidated assets, will convert the Centurion Bank, which is classified as a limited industrial loan company with about 25.3 billion dollars in assets, into a full bank.
The move comes four days before a US Treasury deadline for banks to participate in its 700 billion dollar bank rescue program to provide US banks with additional capital amid turmoil in US financial markets.
The Fed said in its announcement that it judged both AMEX and AMEX travel "adequately capitalized," and that the Centurion Bank was also currently "well-capitalized" under federal rules.
Hit by worsening conditions in the economy, in late October American Express said it was slashing 7,000 jobs, or 10 percent of its worldwide workforce, and cutting spending.
It reported a decline in earnings for the third quarter of 24 percent, to 815 million dollars.
It also said it was suspending management-level salary increases for 2009 and launching a hiring freeze.
Kenneth Chenault, American Express chairman and chief executive, said at the time the reengineering program "will help us to manage through one of the most challenging economic environments we've seen in many decades."
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