America's last two remaining major investment banks, Goldman Sachs and Morgan Stanley, have switched status to become bank holding companies in a move marking the end of an era on Wall Street.
The change in status - granted overnight by the US Federal Reserve - will allow the two banks to take deposits and have equal access to emergency funding from the central bank.
It is the latest in a series of steps by the US government to calm financial markets left in turmoil after the collapse of US investment bank Lehman Brothers and rescue of Merrill Lynch.
Goldman and Morgan both have a significant presence in London, each employing around 5,000 staff at offices in the City.
The change in status will effectively leave America with no investment banks.
It also comes after the US government announced a 700 billion US dollar (£383 billion) rescue plan to buy up toxic assets which are clogging the US financial system in the largest operation of its kind since the Great Depression.
Speculation was mounting last week over Goldman and Morgan, with their shares coming under severe pressure as investors feared for the future viability of any stand-alone investment bank.
Morgan was said to be looking at a possible merger with troubled regional US lender Wachovia, while Goldman was rumoured to have approached a number of banks including Citigroup, JP Morgan Chase and Wells Fargo over potential deals.
But their decision to change status is seen as ending the uncertainty, allowing them also to take advantage of significant Fed support.
Investment banks have been more limited with the types of collateral that they can use for the Fed's emergency funds and have therefore been at a disadvantage to their commercial rivals.
The ability to take retail deposits will also allow them to build a "stable base of core deposits", according to Morgan.
The bank said: "Morgan Stanley sought this new status from the Federal Reserve to provide the firm maximum flexibility and stability to pursue new business opportunities as the financial marketplace undergoes rapid and profound changes."
However, the banks will now be more tightly regulated after the changes.Reuse content