KUALA LUMPUR (May 24): The Government said a stress test on the Malaysian banking system showed that the financial sector would see RM65 billion of losses, assuming house prices fell 40% and a 25% recovery of the resale value of cars.

Deputy Finance Minister Datuk Chua Tee Yong said the test had also taken into account a 5% recovery of personal and credit card loans.

"Based on this stress test, the banking system will suffer RM65 billion in losses, but the banking system has a buffer of RM117 billion, so the financial system is still stable," Chua told reporters at the Parliament lobby.

Going forward, Chua said Bank Negara Malaysia would continue to look at measures to lower household debt. Chua said new measures would be implemented gradually.

Earlier, Chua said in Parliament that Malaysian household debt growth stood at 7.3% as at December 2015, versus 14.2% in 2010.

Chua noted that the main chunk of household debt came from personal loans, which were mostly used to acquire assets.

"The Government, through Bank Negara, has taken various progressive steps to control the growth of household debt since 2010.

"These measures were aimed to ensure good credit management, to encourage better ethics in the granting of credit by individuals and institutions, while also promoting the property market," he said.