Bankers believe “lax underwriting standards” main cause of credit crisis

Fair value accounting doesn't make list of top five causes for the credit crisis

CHICAGO, January 8, 2009 - When it comes to the reasons for the current credit crisis, bankers choose "lax underwriting standards," "political emphasis on increasing home ownership" and "lack of oversight of the mortgage industry" as the top three causes for the current credit crisis. The results are from Grant Thornton LLP's 16th Bank Executive Survey, conducted with Bank Director magazine.

Notably, only 15 percent of bankers selected the much-maligned fair value accounting standard as one of their three top choices as the main cause of the credit crisis, with only "mortgage fraud" having a lower response (11%).

"I think bankers understand that fair value accounting affects only a portion of the balance sheet and by itself it did not cause the current crisis," said Dorsey Baskin, a partner in Grant Thornton's National Professional Standards Group. "Nevertheless, efforts underway to revisit this and related issues such as 'other than temporary impairment' are very welcome."

What do you think are the main causes of the credit crisis? (Select up to three)
Lax underwriting standards	54%
Political emphasis on increasing home ownership	46%
Lack of oversight of the mortgage industry	44%
Inadequate understanding of risks	40%
Lack of oversight of Fannie Mae and Freddie Mac	39%
Credit default swaps	18%
Inappropriate or aggressive commissions for mortgage brokers	18%
Interest rates kept low for too long	18%
Use of the fair value accounting standard	15%
Mortgage fraud	11%
None of the above	1%

For a copy of the full survey, which will be available the week of April 20th, please contact Grant Thornton's Office of Financial Services at 877.835.1723 or FinancialServices@gt.com.

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About the survey
Grant Thornton's Bank Executives Survey provides a snapshot of the banking world, presenting a compilation of opinions of industry leaders on the current state and future direction of the industry. In early November 2008, Bank Director magazine mailed questionnaires to a national sample of 3,000 chief executive officers and other senior officers of banks and savings institutions. A total of 339 completed questionnaires were returned for a response rate of 11.3 percent.

Sixty-two percent of the respondents report assets of less than $500 million, with 38 percent reporting assets greater than $500 million. One-third of the bankers reported that their institutions are publicly held, 55 percent are with private corporations and 12 percent have mutual charters.

About Grant Thornton LLP
The people in the independent firms of Grant Thornton International Ltd provide personalized attention and the highest quality service to public and private clients in more than 100 countries. Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd, one of the six global audit, tax and advisory organizations. Grant Thornton International Ltd and its member firms are not a worldwide partnership, as each member firm is a separate and distinct legal entity.

In the U.S., visit Grant Thornton LLP at www.GrantThornton.com.

About Bank Director
Bank Director magazine is the premier information resource written exclusively for directors of financial companies. Each quarterly issue focuses on the information board members need on the hottest topics in banking - from mergers and acquisitions to retail strategies, compensation, and technology - and features insightful commentary from former FDIC chairman Bill Seidman and financial management guru Alex Sheshunoff. Since its inception in 1991, Bank Director is consistently recognized as an essential resource for top decision makers in the financial industry. With offices in New York City and Nashville, Tennessee, Bank Director is published by Board Member Inc. and is the sister publication of Corporate Board Member magazine. For more information on Bank Director, please visit www.bankdirector.com.