In a statement issued at 9.30pm Sunday, the Federal Reserve said it had approved their applications to become bank holding companies, subject to regulation by the Fed.

It means that both Goldman Sachs and Morgan Stanley will be subject to bank capital requirements but it will also greatly expand their ability to take deposits from savers, reducing their reliance on funding in the short-term repo market.

The Fed approval is subject to a five-day waiting period for potential antitrust issues. During the transition period, the Fed will make loans to both entities and to their London-based broker dealer subsidiaries against collateral acceptable for posting either by a bank or a securities firm.