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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 42 May 2025 C O V E R S T O R Y pecially specific balance sheet indicators that can flag emerging vulnerabilities. "I'm looking at the common equity tier 1 capital ratios (CET1) like a hawk from a balance-sheet standpoint. Any variation on that would be important," said Buhler, adding that "if it degrades, it'll tell us a lot." Buhler notes that capital ratios are critically important as "they summarize the flexibility that a bank might have in its balance sheet to do certain things. JPMorgan Chase is in the upper 15%," explains Buhler, "and I was looking at another small bank, which is at 9%. That's an enormous spread if you think about that." Buhler is also watching shifts in consumer behavior—particularly the types of debt and credit consumers are seeking out. "We are moving some po- tentially long-term debt into very short- term instruments that are not measured consistently by all the banks or by the market in general." Buhler notes that if credit card balances continue increas- ing, we could be at risk of "getting back to a subprime situation." These signals, Buhler warns, could offer early warning signs of larger eco- nomic turmoil to come. 3. Non-Banks Primed to Step Up? B uhler told MortgagePoint that tradi- tional banks and lenders are already showing signs of caution amid current economic uncertainties. "The banks are extremely conserva- tive and are remaining very conserva- tive, which will further the availability of loans as they take the minimum amount of risk they can take," Buhler explains. As banks retreat, non-bank financial institutions may increasingly step in to fill the void. "There will always be play- ers willing to take more risks." Buhler notes that, while this may boost short-term liquidity in underserved sectors, these players face higher risk— and are unlikely to benefit from the same safety nets afforded to regulated banks. Buhler does note a silver lining, however: the industry's vastly improved ability to use data to manage risk. "The ability that the banks have to exploit data … allows them to micromanage at a much lower level, which was not possi- ble [in 2008]. They don't just need to smell the coffee. They can see the color of the coffee and the size of the grain." 4. Policy Uncertainty and Geopolitical Fallout W ith ongoing uncertainties in the regulatory environment adding to the industry's stress points, Buhler said that reductions in federal spending could be another factor to send ripples throughout the financial system. The Trump administration's push for deregulation may help boost efficiency in various areas, but it also removes safe- guards. "From a government standpoint, the policy changes will tend likely to be more towards liberalization and elimina- tion of boundaries versus creating new limitations," Buhler said. "At that level, I don't believe it'll necessarily impede the businesses and the banks. It may not ben- efit the final consumer, but from a purely economic standpoint, it could create more efficiency." 5. Who Bears the Brunt? W ith so many macroeconomic factors in play, Buhler expressed concerns about who will be most affect- ed by the waves being created. "We have to wonder who will suffer the most," Buhler said. "I don't believe it's an equal risk for everyone." Buhler pointed to rising credit card rates and shrinking access to credit as likely outcomes in the months ahead. "You're about to see interest rates on credit cards going through the roof," Buhler said, noting that the economic shifts will likely compound to make less fortunate people, even less fortunate." "From a government standpoint, the policy changes will tend likely to be more towards liberalization and elimination of boundaries versus creating new limitations." —Pierre Buhler, Managing Director, SSA & Company