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UMB Financial CEO Mariner Kemper on the outlook for lending and the impact on the financial sector of low interest rates.
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I -- bank reserves are hitting their lowest level in five years.
But this next bank's CEO says that may not be a good thing for the US.
Mariner Kemper is the CEO of the you can't be financing joins us now on Fox Business exclusive -- thank you for coming out so where where's the money going if if banks aren't holding it in reserves is -- going to small business loans.
To mortgages are they betting on gold where's it gone.
Well not quite sure.
You know that the notion that I said that the bank -- the landings happening.
In in any strange way were that -- lending is lending is up you just saw the FDIC data come out.
This morning in the industry saw of one point 8%.
Improvement in lending and I think it's it.
Where you're finding it isn't C -- -- lending my concern for the way lending is taking place is because interest rates are so artificially low.
The banks are being forced to take risks that they wouldn't be taking otherwise.
Our our Casey on these landings up twelve point.
5% in the period from -- this time a year ago so -- real pleased with our loan growth.
And -- we're most since the united banks so we're we're getting more than our share CNN let me just pushed back a little bit -- because I thought the purpose of these hold -- Group of regulations we have on finances was supposed to prevent banks from taking undue risk you're saying that's not holding here.
Well I I'm assuming you're -- you're referring about Basel.
Well obviously I would target -- our laws also Dodd-Frank had regulation is supposed to prevent some of that from happening but you say it's it's happening anyway.
Well you know.
If history's any any guide for the future we've had thirty plus recessions since the mid eighteen.
Hundreds and we'll have another one we we don't need more regulation we need political will.
So I think that's really the biggest issue as it relates to -- the Basel.
You know banks will be forced to hold more capital and that that will affect probably the amount -- lending -- takes place going forward to.
Potentially bring down the level lending that's possible.
But but there it's it's about interest -- risk isn't it I mean it it doesn't really make business sense for you to make a thirty year loan.
With rates this low why would you take that risk when rates inevitably in thirty years gotta be up higher.
Well the reality -- it is it's it's about your options.
So bank has the option.
Putting their money.
Into a loan that does have potential risks down the road or putting it into a fixed income security.
That that is carrying a much lower current return so there is there is a great deal of risk being taken.
On term risk in order to -- current current yields.
By the way we today we saw this Hudson -- -- deal was selling it to.
M&C use you suggest that regulations.
Are -- going to encourage more bank consolidations how does that work.
Well it.
All the things have come out of Washington so far but the last couple years are really ultimately driving the costs of business up.
For the financial institutions so from Basel two CF PB to Dodd-Frank to -- All of it really ultimately cause and drives the cost up of our of our business.
And it's the smaller banks to suffer the brunt of that because they don't have as many assets to spread those costs across so there will be more consolidation I believe.
As as time goes on have only been.
28 this year and totaled fourteen point four billion transactions of which three billion of that was Hudson city so this year's been light.
But I got to think you'll see more consolidation.
Mostly because.
The returns are coming down in the complexity of the business in the costs are going up.
You can bank on -- -- thank you very excited to see it appreciate mariner -- thanks UMB financial.
-- -- my friend thank you.
