Deutsche Bank had already stressed Monday that it had "sufficient" reserves to service its so-called tier 1 debts, or its most junior bonds.
But this did not stop the cost of insuring the debt of Deutsche Bank using credit default swaps (CDS) from spiking, surging over 200 basis points on Monday, widening further than at any point during the financial crisis in 2008.
"The price of Deutsche shares appear to be pricing in significant recapitalization, which I don't expect to happen. The credit market response, rise of the CDS is bringing back memories of 2009, which is driving equities prices, but this time is different when you look at asset quality and capital ratios which are so much stronger than they were seven years ago," head of European banks research at Nomura, Jon Peace told CNBC Tuesday.
"Deutsche has been singled out a bit, profitability is suffering and it is difficult to quantify tail risks as it related to litigation. Management has a de-leveraging plan in place, completing the picture now by reducing assets, but we just haven't seen much of that benefit come through yet. Markets are very impatient. They need to get on with deleveraging as quickly as they can and shrink the tail risks as quickly as they can," he added.