ABSTRACT
This chapter analyses the pro-cyclicality attribute and its possible solutions. The chapter focuses on the cyclical attribute and the Bank Recovery and Resolution Directive (BRRD) resolution regime and the Single resolution Mechanism (SRM). In terms of dealing with the bank failure problem, an inescapable question is whether the bailout alternative is more efficient in tackling distressed banks or whether the bankruptcy alternative makes stakeholders better off in the situation of insolvency. When it comes to the bankruptcy option, a distressed banking institution is normally referred to as an entity that is no longer viable or likely to be no longer viable, and thus has no reasonable prospect of recovery. Just like the distress of any other firm, a few common problems would also arise in a distressed bank. The enactment of the BRRD happened against the backdrop of bank failures in the highly integrated banking sector, which corresponds to the denotation of the structural problem.
