Morgan Stanley's planned sale of a stake in the firm to Japan's Mitsubishi UFJ Financial Group was approved Monday by the Federal Reserve.
The central bank signed off on Mitsubishi's application to buy up to 29.4 percent of Morgan Stanley's voting shares and to acquire an interest in three subsidiaries, including its Salt Lake City-based bank, according to a statement from the Fed.
Morgan Stanley, the second-biggest independent U.S. investment bank after Goldman Sachs Group, agreed to sell a 21 percent stake to Mitsubishi for $9 billion on Sept. 29, seeking to shore up investor confidence after borrowing costs climbed and the New York-based firm's stock fell by half.
Mitsubishi UFJ, Japan's biggest lender, will buy $3 billion of common stock and $6 billion of convertible preferred stock that pays a 10 percent dividend, the two companies said in a statement at the time.
Morgan Stanley Chief Executive Officer John Mack is raising capital, seeking to boost deposits and transforming the company into the fifth-biggest bank-holding company after investors lost confidence in firms that depend on bond markets for financing. Mitsubishi UFJ has reported about $1.3 billion in credit-market losses and writedowns since last year, compared with $15.7 billion at Morgan Stanley.
Both Morgan Stanley and Goldman Sachs, the last two major independent investment banks in the United States, won approval last month from the Fed to convert to bank holding companies in an effort to withstand the severe financial storms raking Wall Street.