THE CASE OF THE BASIC BANK: The BASIC Bank Limited (Bangladesh Small Industries and Commerce Bank Limited) was one of Bangladesh's best state-owned banks until the Bangladesh Bank's economic intelligence section discovered severe allegations against the bank's top managers regarding loan scamming from 2009 to 2013. BASIC Bank began operations in 1989 after being founded as a banking business under the Companies Act of 1913. On the 2nd of August, 1988, it was established under the Act and began operations on the 21st of January, 1989. The Bank was created as the country's policymakers recognized the need for a private sector bank to finance Small Scale Industries. The Bank began as a joint venture between the BCCI Foundation and the Government of Bangladesh (GOB), with the BCCI Foundation owning 70% of the shares and the GOB owning the remaining 30%. On the 4th of June 1992, however, the Bangladeshi government acquired 100% ownership of BASIC. As a result, it became a state-owned bank, while it is not nationalized and continues to operate as a private bank. Basic Bank's goals are unique, and it is a hybrid of development and commercial banks. The Bank's Memorandum and Articles of Association mandate that half of the bank's loanable funds be invested in small and cottage companies (BASIC Bank website, 2018). According to Bangladesh Bank reports, almost Tk. 4,500 crore was fraudulently obtained in the name of loans from the bank with the direct involvement of the bank's chairman at the time, as well as the assistance of other board members. The fact that more than 95 percent of the Tk 4,500 crore swindled out of the bank was sanctioned by the board was very astonishing under this situation. The loan amount in each case exceeded Tk 1.5 crore, which the management cannot sanction without the board's consent (Khan and Uddin, 2018). The Board of Directors of Bangladesh Bank (BB) discovered various irregularities in the loan granting procedure. According to a 2014 report by the Bangladesh Financial Intelligence Unit (BFIU), the central bank's anti-money laundering unit, around Tk. 20 crore was transferred from several companies that received loans from BASIC Bank through scams to the bank accounts of two firms owned by a close family member of the Chairman. Another interesting element to note is that BASIC Bank issued a loan of Tk 5.60 crore to BS Trading in 2010 before the company had even opened an account with the bank. In 2012, the loan amount was increased to Tk 33 crore. However, the branch in question provided no justification for the increase. It didn't even check if the property that was mortgaged against the loan was actually owned by the borrower. Furthermore, despite the fact that it was required, no credit risk analysis was performed prior to the loan approval. The mortgaged land's documentation were not obtained (Alo, 2017). This indicates that there were severe flaws in the bank's governance processes at the time. The BB team issued a 47-page report, which includes a list of borrowers, detailing how the loans were approved and then withdrawn in clear violation of the guidelines in nearly minute detail. The BB report revealed a major governance failure, stating that BASIC Bank's board and credit committee at the headquarters ignored unfavorable views from the bank's branches on a number of loan proposals, and authorized them without proper diligence. The central bank sacked the managing director of BASIC Bank in May 2014 for presiding over a period of major irregularities at the state-run bank. He was found guilty on seven charges, including lack of sound management, failure to protect depositors' interests, and loan irregularities, by Bangladesh Bank. Following this occurrence, the Anti-Corruption Commission (ACC) filed 56 complaints in 2015, alleging 110 people and organizations of gross loan irregularities totaling over Tk 4,500 crore. According to the ACC, 27 of the accused were bank executives, while the remainder were borrowers and surveyors (The Daily Star, 2016). Despite the paper evidence and practical claims leveled against the bank's then-chairman, he was not named as a defendant in any of the ACC proceedings, raising doubts about his political ties to the swindle. 1. Identify any two Central Bank policies that BDDL should apply after merging with Basic Bank to help the bank recover. Justify your position using logic.

2. The Federal Reserve failed to preserve Lehman Brothers from bankruptcy, resulting in their downfall. Basic Bank, on the other hand, was denied such a case by the Bangladesh Bank. Why do you believe these two central banks made such diametrically opposed decisions? Justify your response.