Nationwide ‘determined’ to lend despite £1bn+ capital hole

Nationwide Building Society has dismissed speculation it will reduce lending after the regulator brought forward plans to plug a £1bn-plus capital hole.

Last week the Prudential Regulation Authority (PRA) released details of its estimate of the capital position of eight banks and building societies and demanded Nationwide submit a plan to increase its ratio of capital to loans from 2% to 3% by the end of June.

However, a Nationwide spokesman today told Mortgage Solutions that it had no plans to reduce lending saying “We have put in a very strong record of lending over the last few years”.

Nationwide chief executive Graham Beale had told the Financial Times the leverage ratio was an unsophisticated measure which ignored the quality of an organisation’s business model:  “It is a crude instrument which will be a constraint for low-risk lenders [and] too lenient for high-risk lenders.”

While Nationwide had the lowest estimated leverage ratio of the eight lenders scrutinised by the PRA, it also singled out Barclays for its ratio of 2.5% and demanded a similar plan to raise capital.

The regulator has set a deadline of end of July for the revised plans to be agreed.

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