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Jaywing helps Nationwide achieve great stress testing results

Nationwide and Jaywing’s stress testing partnership promotes a more stable banking sector and better customer outcomes.

One of the main responsibilities of the supervisory authorities is to ensure a sound, stable and efficient financial system. Stress testing is becoming increasingly valuable to financial authorities in monitoring and safeguarding the stability of the financial environment.

On 01 December 2015, the 2015 stress testing results were revealed, and the results showed that there has been significant improvement in stress testing processes since the 2014 review.

Nationwide were one of the top seven banks and building societies required to take part in this new stress testing regime. The new framework was significantly different from previous experiences, with the timescales being much shorter and the results being made available to the public for the first ever time.

Nationwide wanted to ensure their results performed against these challenges. Their aim was to give the Prudential Regulation Authority (PRA) confidence in their overall stress testing outcomes, demonstrating the high quality analysis they’d performed to achieve such conclusions. That’s why they needed Jaywing’s help.

Jaywing were asked to support Nationwide’s internal stress testing team with a best practice approach. From that point on our analysts and consultants formed a key part of their team, leading a long-term project to help develop their stress testing method and models to be used to forecast credit risk losses under a variety of macro-economic scenarios.

After introducing our new methodology, we performed two Bank of England stress tests and two Internal Capital Adequacy Assessment Processes (ICAAP). We then handed this new, and significantly improved, process back to Nationwide’s internal team, confident that this would help them successfully manage future stress testing projects.

As a result of our involvement, Nationwide were able to complete their stress testing programme on time and to a high standard. This helped Nationwide execute a best practice standard to stress testing, all without impacting on Nationwide’s day-to-day business.

Speaking about our work, Matthew Kent, Nationwide’s Head of Group Lending, said: “Jaywing’s ability to deliver on all aspects of the project meant we could be highly coordinated and more resource efficient than by using a collection of qualified individuals. Jaywing’s proposal offered a true partnership approach.”

“The new stress testing approach opens us up to considerable public and market scrutiny; however we see it as a further opportunity to demonstrate to the PRA that Nationwide’s foundations are sound and secure. Jaywing’s involvement brought high quality analysis and timely delivery that supported our overall stress testing outcomes.”

Nathan Spry, Head of Credit Risk Financial Planning at Nationwide added, “Aside from the Jaywing team feeling like an extension of my own stress testing function, I was equally impressed with their appetite to explore and present a wide breadth of options as we progressed through the modelling challenges and builds. Bringing both industry experience and innovative thinking to bear as they supported our investment in forecasting capability provided me with confidence and trust in the eventual outcome.”

The relationship between Nationwide and Jaywing will continue, as we both continue to work towards towards a more stable banking sector and better customer outcomes.

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