Amidst recent crisis, Deutsche Bank hopes of $5.4bn US settlement

Talk of Deutsche Bank becoming the next Lehman Brothers rattled the banking sector. Shares of Deutsche Bank plunged by 30 percent in the last three weeks as the US Department of Justice had imposed fine of $14 billion for mis-selling mortgage backed securities.

IMF had warned earlier this year, Deutsche’s links to the world's largest lenders make it a bigger potential risk to the wider financial system than any other global bank.

German Chancellor Angela Merkel told reporters in Berlin she hopes the problems at Deutsche Bank can be solved. However, Deutsche Bank chief executive John Cryan refutes claims the lender sought the assistance of the German government in settling its $14bn US demand  in an interview with German daily Bild. 

Markets were spooked by a report that several hedge funds had withdrawn their investments in Germany's biggest lender over worries about its viability. Those fears come after US authorities slapped the bank with a USD 14 billion penalty over its sale of mortgage-backed securities prior to the 2008 financial crisis.

There are growing concerns the fine could batter the already fragile company, fuelling talk that it would become another Lehman Brothers, the Wall Street titan whose downfall precipitated the global downturn.

Talk of a US rate hike a plus for the dollar increased after the US Commerce Department said yesterday the world's top economy grew 1.4 per cent in the second quarter, faster than the preliminary 1.1 per cent.

Federal Reserve Atlanta president Dennis Lockhart said the US central bank is nearing its goals of maximum employment and steady inflation close to two percent, while Kansas City Fed president Esther George said she supports tighter policy.

"The Fed speakers continue to try their absolute best to guide the market to increase pricing for December," Sam Lynton-Brown, a foreign-exchange strategist at BNP Paribas, told Bloomberg News.