Nationwide's Response to the Stress Test Results

RNS Number : 6597X

Nationwide Building Society

28 November 2017

 

NATIONWIDE'S RESPONSE TO THE RESULTS OF THE BANK OF ENGLAND STRESS TEST 2017

Today the Bank of England issued the results of its latest Concurrent Stress Test. The specified hypothetical Annual Cyclical Scenario (ACS) was consistent with ACS 2016 with a 33% fall in house prices and 9.5% peak in unemployment, but with the addition of a rapid increase in Bank Base Rate to 4%.

Despite the more severe credit shock than in the 2016 test, the results of the 2017 test confirm that Nationwide would remain profitable in such conditions and continue to make full distributions on all Tier 1 capital instruments, with a minimum stressed CET1 ratio of 12.3%, and a minimum UK leverage ratio of 4.5%, after the application of management actions. In each case the Society remains substantially above the regulatory hurdle rates set for this stress test of 8.4% CET1 ratio (which comprises Pillar 1 and Pillar 2a requirements) and 3.25% UK leverage ratio, both before and after the application of management actions.

The PRA has confirmed that Nationwide is not required to submit a revised capital plan or take additional actions as a result of this stress test exercise.

The CET1 ratio reduces primarily due to the impact of the significant house price reduction, rising interest rate environment and increase in unemployment rate on model risk weights, rather than capital losses.

Nationwide recognises the value of industry-wide stress testing and continues to support the financial stability objectives of the Financial Policy Committee and the Bank of England.

On 17 November, Nationwide issued its interim results for the period 5 April to 30 September 2017. These results reflected the continued capital strengthening and security of our business with a CET1 ratio of 29.6% (December 2016: 24.4%) and UK leverage ratio of 4.9% (December 2016: 4.3%).

For all media enquiries please contact Sara Batchelor on 07785 344137

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