TEXAS CAPITAL BANCSHARES INC TX
Q1 2023 Form 13-F

The firm is subject to the Gramm-Leach-Bliley Act regarding data privacy and must notify federal regulators within 36 hours of any significant computer-security incident. Under a July 2023 SEC rule, it is required to provide standardized disclosures regarding cybersecurity risk management, strategy, and governance, as well as current reporting on material cybersecurity incidents. It also faces an increasing number of state and international privacy regulations, such as those in the European Union, which require ongoing investments in information systems and compliance. Furthermore, the firm must comply with the Community Reinvestment Act (CRA), which requires meeting the credit needs of low- and moderate-income areas. Because Texas Capital Bancshares, Inc. focuses on commercial customers through a limited branch network, satisfying CRA requirements is more challenging than for retail-focused peers. A 2023 modernization rule that would have altered CRA assessment methodologies is currently subject to an injunction and a 2025 proposal for rescission.

Operational compliance extends to anti-money laundering (AML) and counter-terrorism financing under the Bank Secrecy Act (BSA), the USA PATRIOT Act, and the AML Act of 2020. These laws require the firm to maintain rigorous controls to detect suspicious activity and verify customer identities; failure to comply can result in significant legal and financial consequences. The firm also adheres to Office of Foreign Assets Control (OFAC) sanctions by blocking accounts and transactions involving prohibited foreign parties. Under the Federal Deposit Insurance Act (FDIA), the firm is subject to safety and soundness standards covering internal controls, loan documentation, and interest rate exposure. Regulators have the authority to impose civil money penalties exceeding $2 million per day for violations.

Texas Capital Bancshares, Inc. is restricted in its transactions with affiliates and insiders. Under Sections 23A and 23B of the Federal Reserve Act, extensions of credit to a single affiliate are generally limited to 10% of the bank's capital and surplus, with a 20% aggregate limit for all affiliates. Regulation O further restricts lending to executive officers, directors, and 10% stockholders. The firm’s ability to fund its obligations depends on dividends from Texas Capital Bank, which are prohibited if the bank is undercapitalized. Additionally, the bank’s deposits are insured by the FDIC up to $250,000. To restore the Deposit Insurance Fund (DIF) reserve ratio to the statutory 1.35% minimum, the FDIC has implemented increased assessment rates and a special assessment related to 2023 bank failures, which initially carried an annual rate of 13.4 basis points. Other regulatory constraints include the Volcker Rule’s prohibition on proprietary trading and the Durbin Amendment’s caps on debit card interchange fees, which are limited to 21 cents plus 0.05% of the transaction. Finally, Texas Capital Securities is overseen by the SEC and FINRA, which regulate its capital levels, management, and internal controls.