The Federal Reserve Board has approved an application by American Express to become a bank holding company, the central bank said on Monday.
The move will allow the U.S. fourth largest credit card company to secure funds from deposits, which can be cheaper than borrowing in bond markets.
Last month, American Express said it would cut 7,000 jobs, slash expenses and scale back investments to save $1.8 billion next year, in its biggest restructuring since 2001, as it struggles with bad loans and surging funding costs.
"In light of the unusual and exigent circumstances affecting the financial markets ... the Board has determined that emergency conditions exist that justify expeditious action on this proposal," the Fed said in a statement.
American Express follows Goldman Sachs and Morgan Stanley , which became bank holding companies after decades of having relied on debt markets for funding.
American Express' borrowing costs relative to a benchmark rate have risen dramatically this year as investors became increasingly skittish about the company facing rising customer defaults.
"An unemployed consumer is going to be a big challenge," for American Express, Anton Schutz, president and chief investment officer at Mendon Capital, said at the Reuters Global Finance Summit, earlier on Monday.
"Their clients are hurting and, on top of that, their upper income client base isn't spending either, which is hitting the travel side of their business."
In recent years, American Express expanded faster than rivals by signing up more middle-class clients. Now, the company is paying the price of its expansion: the default rate among its credit card clients in the United States almost doubled in the third quarter of 2008 from a year earlier.