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Bank regulations may hit investors, but some of it just 'noise,' expert says

Banks in the crosshairs?

While concern over increased regulation of banks has some investors skittish, one investment expert told CNBC on Wednesday it's not as big of a deal as some may think.

The Federal Reserve is considering increasing the capital requirements for large U.S. banks to pass its stress tests and is reviewing whether the largest U.S. lenders are complying with banking rules in the wake of the Wells Fargo scandal.

While over-regulating any industry is negative for shareholders and stock performance, UMB Bank's chief investment officer KC Mathews isn't panicking.

"What's critical is some of this, I believe, is nothing more than noise, because the banks … are ready for it," he said in an interview with "Power Lunch."

Jeff Reinking | NBAE | Getty Images

That said, more regulation will make it more difficult to invest in the financial space, he said. Investors just need to look for banks that are less capital intensive.

"It will hinder the way that banks deploy capital. Perhaps they can't repurchase shares or increase dividends or reinvest in capital expenditures," Mathews explained.

The financial sector has already been hit thanks to pressure from regulators, low interest rates and damaging headlines at Wells Fargo and Deutsche bank.

The KBW Nasdaq Bank index is off almost 4 percent in 2016, and financials as a whole are the second-worst performer on the S&P 500.

But Mathews said there is likely to be good news on the horizon.

"The critical driver in earnings is interest rates. So if you are in the camp that sooner or later we will get some increase in interest rates, I think the tide will come in and the tide will lift all boats."

Among the banks UMB Bank owns is Morgan Stanley, Mathews said, because it is less capital sensitive, with 50 percent of its revenue coming from its wealth management business. He also thinks there could be an opportunity in small, regional banks, especially with Janet Yellen indicating there may be different tiers of regulations for larger banks and smaller banks.

— CNBC's Jeff Cox and Reuters contributed to this report.