Shares of American Express Co. (NYSE: AXP) are tumbling after an analyst at Stifel Nicolaus downgraded the companies because of potential negative impact of pending government regulations.

Analyst Chris Brendler cut his rating on the company to "hold" from "buy," citing the possible ramifications of the Federal Reserve proposal from last week a cap on fees that banks can charge merchants for debit-card transactions, much of the attention focused upon

AmEx shares have dropped 5.68 percent to $41.49 per share as of 12:35 p.m. (EDT).
 "We see American Express as heavily exposed given its high cost model and lack of market power at the point of sale,” wrote Brendler.

“While it does have very loyal, valuable customers, we foresee an inevitable shift against Amex as merchants become increasingly focused on payments costs.”

Brendler explained that the proposed cap could compel merchants to pressure consumers to using lower-cost debit cards, which would heighten the discount threat to American Express.

In addition, he thinks the Federal reserve may next consider regulation of credit card fees, which would further threaten AmEx’s profits.