Deutsche Bank's shares have plummeted to fresh lows, hitting their lowest level since the 1980s.
Shares in the troubled German bank slipped to 9.98 euros at one point before settling at just above the 10 euro mark, down over 6%.
The collapse follows reports that ten hedge funds had reduced their exposure to the lender and have taken their business elsewhere.
The news spooked investors, who have continued a dramatic sell off which was triggered by a proposal tabled by US authorities that could see the bank slapped with a 14 billion US dollar (£10.5 billion) bill, linked to the sale of mortgage-backed securities during the financial crisis.
The German lender's performance dragged down other European exchanges and banking stocks, including British lenders Barclays and Royal Bank of Scotland, which were down 3.4% and 2.37% respectively.
The FTSE 100 has taken a pounding as a result, with the index down 78 points to 6,840.
Connor Campbell, financial analyst at SpreadEx, said: "After a couple of days of relief the markets are back in the red, with Deutsche Bank continuing to position itself as the number one worry for investors.
"European markets are rattled. The FTSE has now lost all of the 2016 high-grazing growth it managed yesterday, falling back below 6850 in part thanks to the declines seen by Barclays and RBS - the latter of which is perhaps most in line for a Deutsche Bank style shock."
Germany's DAX dropped by nearly 150 points, with the CAC falling 1.6%, dragged down by heavy losses incurred by BNP Paribas, Credit Agricole and Societe Generale.