12 first, we need to address the excessive year - over - year volatility, which flows through to the calculation of stress capital buffers. as i noted, capital planning for many firms is a longterm enterprise, and excessive volatility and unpredictability of stress capital buffer levels can increase costs and complicate capital allocation and management. of course, the goal is not to eliminate variability over time — variability based on changing economic conditions and changing firm business activities and balance sheets — but rather to blunt the excessive volatility observed over the history of stress testing. there are many possible ways to limit excessive volatility while maintaining the value of the board ’ s stress tests. for example, one solution could be to average results over multiple years, so a firm ’ s stress capital buffer would move in smaller increments through the averaging process. another possibility is to constrain variability in annual stress test scenario design. countercyclicality in the design of the regulatory stress tests — where the stress experienced by firms is more severe when economic conditions are better — acts as a counterweight to the inherent procyclicality of risk models. this approach “ eases ” capital requirements ( through lower stress capital buffers ) as economic conditions decline. but this countercyclicality is also a driver of volatility, and we should look more closely as to whether our attempts to adjust for countercyclicality are appropriate through the lens of stress test volatility. second, i think there is a benefit to promoting greater transparency in stress testing, particularly as it relates to the disclosure of the underlying models. stress testing need not be an exercise shrouded in secrecy, and the federal reserve has shown in the past that improvements are possible. for example, in 2019, the board adopted new principles that guide the design of - 13 the stress tests, and promoted greater transparency. 13 in addition to these principles, the board moved to provide more information about its stress testing models, including ranges of loss rates for actual loans held, portfolios of hypothetical loans with loss rates estimated by the board ’ s models, and more detailed descriptions of the board ’ s models ( including some granular information about certain equations and variables used in the models ). 14 while these were positive steps in promoting transparency, the announcement of design principles and enhanced disclosures did not go far enough in my view, and we have seen that even after several years, firms continue to

in our economy has also been supported by increased lending by banks, including to households. for a number of advanced economies, this trend has become a source of concern. this is in view of their rising household debt that have exceeded prudent levels in the range of 80 - 100 % of gdp. household indebtedness in malaysia has, however, remained within prudent levels at 60 % of gdp. another important consideration that needs to be taken into account is the ability of households to service their debt. with rising income levels, the household sector in malaysia has continued to accumulate net financial savings as reflected in higher accumulation of deposits against accumulation in debts. household deposits, as a percentage of gdp, remains high at 67 %. strong household debt servicing capacity is also reflected in the continued improvement in non - performing loans ratio of the household sector, which declined from a peak of 12. 2 % at end - 1998 to 8. 1 % at end - november 2003. amidst low and stable inflation, the cost of financing has been kept low to promote sustained consumption and, of greater importance, to stimulate stronger investment activities. the positive effects of increasing bank lending, especially to small businesses, have been an important factor in supporting the domestic economy. as at end - november 2003, bank lending to small and medium scale enterprises expanded by 9 % year - on - year, accounting for one - third of the share of business loans. the growth of the small and medium scale enterprises is important in supporting a more balanced economic structure that will enhance malaysia's potential for economic expansion and employment. the merdeka savings bond will provide malaysians with an additional avenue and incentive for savings. for retirees who spend out of their pensions and accumulated savings, returns on their savings is an important source of income to support their consumption. the individual responsibility to have in place a sound long - term retirement income strategy, that integrates private savings, contributions to the employees provident fund and supplementary private pension and annuity plans, has therefore become important. ladies and gentlemen, this is not the first time that bank negara malaysia has issued such bonds. the second and third series of the malaysia savings bonds, which were issued in november 1999 and february 2002 respectively, had the same underlying objective. each time, the features of the bonds have been enhanced. the merdeka savings bond is for retirees who are 55 years old and above, and who do not have a full - time job. armed forces personnel who