Two months after leading investment bankers Goldman Sachs and Morgan Stanley transformed themselves into full-fledged banks, it is now the turn of credit card giant American Express (AmEx) to follow suit. The world’s fourth-largest credit card issuer received a go ahead from the US Federal Reserve in mid-November to convert itself into a commercial bank.
In India, AmEx still operates its card business as a restricted banking entity because RBI doesn’t allow Non Banking Financial Companies (NBFCs) to undertake credit card business. The AmEx move doesn’t come as a surprise, however, as it gives the bank access to the Federal Reserve for a $700-billion bailout package. It also gives AmEx an opportunity to grow its deposits as alternative funding sources. “Given the continued volatility in the markets, we want to be best positioned to take advantage of the various programmes the federal government has introduced or may introduce to support US financial institutions,” AmEx Chief Executive Kenneth Chenault said in a statement.