Rumors suggest regulators working on Deutsche rescue secretly

Rumors in the market are suggesting that Germany’s biggest bank might receive a rescue from the government, though both have denied such allegations. Deutsche bank denied that it has asked the government for help and the government denied any rescue plan. However, the rumor has helped to push up the share price of Deutsche bank today by 2.5 percent. While German benchmark stock index DAX rose by 90 percent since 2012, the share price of Deutsche bank declined by close to 50 percent. The Share price has hit the lowest level since the 80’s.

Germany’s Die Zeit newspaper reported that the government has been preparing a contingency plan if the fines imposed by the United States push it to the brink of collapse. According to the report, the plan includes asset sell by Deutsche to ease the burden and in the case of an emergency, the German government would take up a 25 percent stake in the bank.

The US regulator has a plan to impose a $14 billion fine on Deutsche bank for financial misconduct but not finalized that yet. So a lot will depend on that decision.

The dire state of the Germany’s biggest lender shows the weakness persisting in the European banking system and how bad the recovery, as well as, the negative rate has been for the banks.