American Express given permission to become a bank

Pakistan News.Net
Tuesday 11th November, 2008

Credit card giant, American Express, has been told by the US government that it can become
a bank holding company, allowing it to issue bonds that are government guaranteed through to the end of June 2012.

American Express, which has suffered from loans to delinquent US homeowners, has applied to receive money under the Treasury's $700 billion Troubled Assets Relief Program, which is making direct investments in banks, insurers, and other
financial companies.

Under the ruling, American Express will now be able to buy banks and take deposits from consumers and companies, leading to a cheap source of funding.

American Express' borrowing costs relative to a benchmark rate have risen dramatically this year,with funding pressure combining with credit pressure.

The default rate among its credit card clients in the United States almost doubled in the third quarter from a year earlier.

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