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The uncertainty facing European banks was underscored on Wednesday as Germany was forced to deny preparations for a Deutsche Bank rescue plan and the head of Credit Suisse warned the sector was “not really investable”.

Credit Suisse chief executive Tidjane Thiam said the industry was in a “very fragile situation” where individual banks had become susceptible to extreme share price movements “on the basis of a relatively minor piece of news”.

He cited “regulatory uncertainty” about future capital requirements and potential fines, and said there was now a “fundamental doubt” over whether the industry still had a viable business model.

“That’s the big, big, big question,” he told a Bloomberg conference.

The comments from the head one of Europe’s biggest banks came as the German government denied reports it was working on a rescue plan for Deutsche Bank, whose financial position has come under mounting scrutiny since US authorities demanded $14bn to settle allegations of mis-selling securities.

The German newspaper Die Zeit reported on Wednesday that chancellor Angela Merkel’s government and the relevant German and EU financial supervisors have officials working on contingency rescue plans, despite public statements to the contrary.

According to the draft plan referred to in Die Zeit, Deutsche Bank would be helped to sell assets at prices that would not incur big losses — if needs be via a state guarantee. The bank at present trades at 0.2 times its stated book value.

In a dire emergency, the German government would even offer to take a direct stake of 25 per cent.

However, the German finance ministry said on Wednesday that Die Zeit’s story was “incorrect”. “The government is not working on any rescue plans. There is no reason for such speculations. The bank has made this clear.”

Concerns have been rising since Monday, when Deutsche’s share price dropped more than 7 per cent to levels not seen since 1983. Its share price rose 3.6 per cent on Wednesday to €10.93.

Deutsche’s chief executive, John Cryan, said in an interview with Bild published late on Tuesday that a government rescue was “not an issue” for the bank, and insisted that he had not asked Ms Merkel for help in dealing with the US authorities.

In a message posted on the bank’s intranet, the company told staff that neither a capital increase, nor a state rescue was on the agenda. The statement went on to point out that the bank met official capital requirements and that its liquidity stood at more than €200bn.

Die Zeit said the plans were designed for a scenario in which Germany’s biggest lender needed to raise capital to meet the US authorities’ demands, but was unable to do so in the market.

Deutsche insists that it has no intention of paying anywhere near the $14bn demanded by the Department of Justice as an opening bid to resolve allegations of mis-selling mortgage-backed securities in the run-up to the financial crisis.

Several other banks that have settled with the DoJ have paid considerably less than the DoJ first requested. But the scale of the request — more than twice the €5.5bn that Deutsche has set aside to deal with its legal entanglements — has unsettled investors.

Deutsche’s shares have fallen by more than half over the past 12 months. But they rose 2.6 per cent on Wednesday after the bank said it was selling its Abbey Life insurance business in a deal that would boost its core tier one capital ratio — a closely watched measure of financial strength — by 10 basis points.

At the end of June the ratio stood at 10.8 per cent, above the minimum demanded by regulators, but below the level of many of the bank’s peers.

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