A Texas law aimed at punishing banks for discriminating against gunmakers is set to take effect, and Citigroup, which was targeted by the measure's supporters, has already lost substantial market share.
Banks and other companies that have contracts with Texas municipalities will have to certify beginning on Sept. 1 that they do not have policies discriminating against firearm or ammunition businesses. So far, industry officials are not betraying much concern about the measure's impact.
“To date, we have no knowledge of terminated contracts, nor have we received information about municipalities providing any notices related to their compliance,” a spokesperson for the Texas Bankers Association said Tuesday.
The spokesperson also said that the law has not even been a “notable discussion point” in the trade group’s regular conversations with banks.
The law, signed by Republican Gov. Greg Abbott on June 14, has been seen as a threat to certain big banks that are involved in the lucrative municipal bond issuance business in the Lone Star State.
The law’s effects will likely take more time to play out, and banking industry representatives are still wary of possible side effects. Once the certification requirements go into effect next month, it seems possible that municipalities will become more skittish about signing new contracts with certain big banks.
“We have and will continue to monitor,” the Texas Bankers Association spokesperson said.
One of the major targets of the law was Citigroup, which announced new restrictions on financing for gun companies following the 2018 mass shooting at Marjory Stoneman Douglas High School in Parkland, Florida.
Citi accounted for more than 10% of the $58.4 billion in municipal bond issuances in Texas last year, the highest percentage of any bank, according to data from Refiniv, which tracks the industry.
So far this year, Citi’s market share in Texas has dropped to about 6%, which is sixth in the industry, totaling nearly $1.9 billion of municipal bond business in about seven and a half months, according to the data.
After Abbott signed the bill, Citi’s head of global public affairs, Ed Skyler, defended the megabank’s 2018 policy change but also indicated that the new Texas law should not put a dent in its business.
“We have determined that the legislation doesn't prevent us from serving our clients in Texas, as our policy does not restrict us from working with retailers because they sell firearms,” Skyler wrote in a blog post.
“It simply requires our clients to use best practices when selling firearms," he wrote. "We have continued to serve retail sector clients that sell firearms, including those in Texas, who use these responsible practices.”
Bank of America, which announced in 2018 that it would halt financing for companies that manufactured military-style weapons for civilians, also appeared to be a target of the law.
But through mid-August of this year, BofA handled more than $3 billion in municipal bond issuances in Texas, or slightly more than the $2.8 billion that it handled by the same time in 2020.
A spokesperson for the Charlotte, North Carolina, bank declined to comment on any fallout from the law.
JPMorgan Chase has fared even better this year in Texas.
The nation’s largest bank by assets handled $3.07 billion in new municipal bond issuances through mid-August, which translated into 9.8% market share in Texas, the most of any company. At the same time last year, JPMorgan had handled $2.4 billion in municipal bond issuances, which amounted to a 6.8% share of the Texas market, according to the Refinitiv data.
JPMorgan has not drawn as much criticism from gun-rights advocates as its two rivals. But in 2018, then-Chief Financial Officer Marianne Lake
And when JPMorgan CEO Jamie Dimon was questioned about the bank’s gun finance policy during a May 27 appearance before the House Financial Services Committee, he indicated that changes the bank made were not dissimilar from the moves by Citi and BofA.
“I don’t think it’s that different to tell you the truth,” Dimon said at the hearing. “We do not finance the manufacturing of military-style weapons for civilian use, though we do finance that for military use because we obviously support and love the American military.”
During the legislative debate over the Texas bill, banks with policies that impose limitations on doing business with gunmakers had scrambled to defeat it. Other opponents of the proposal said that cutting off major banks from the municipal bond business would lead to less competition and potentially higher costs for taxpayers.
The Independent Bankers Association of Texas, which represents smaller banks,
