Nationwide's Response to the Stress Test Results

30 November 2016

NATIONWIDE NOTES THE RESULTS OF THE BANK OF ENGLAND STRESS TEST

Today the Bank of England issued the results of its latest stress test. The specified stress scenario was a combination of the more severe elements of CST 2014 and CST 2015, incorporating a sharp increase in the cost of credit for households and businesses accompanied by a 0% Bank Base Rate, a near doubling of the unemployment rate to a peak of 9.5% and a 31% fall in UK house prices.

Despite the severity of this scenario the results illustrate the strength and resilience of Nationwide. The Society projects that it would remain profitable in each year of the stress, and have low point stressed ratios for CET1 and leverage of 15.6% and 4.2% respectively after the effect of management actions. The CET1 ratio reduces primarily due to the impact of the significant house price reduction and increase in unemployment rate on model risk weights, rather than capital losses.

Nationwide remains substantially above the regulatory hurdle rates set for this stress test of an 8.1% CET1 ratio (Pillar 1 and Pillar 2a CET1 requirements) and 3% leverage ratio. 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.

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.

For all media enquiries please contact Sara Batchelor on 07785 344137 or Stuart Williamson on 07545 740195.

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