Why is the European financial system is getting shakier by the day?

The pressure inside the European financial system doesn't seem likely to lower anytime soon with the latest development coming out of Deutsche Bank who received a demand from the US Department of Justice ordering the corporation to settle a $14 billion fine related to mortgage-backed securities that were mis-sold to the public during the build up to the 2008 Financial Crisis.

However top management responded quickly to dispel speculation over the mammoth amount it could potentially have to pay over to US authorities by indicating that it expected to pay the penalty but confidently said it would be able to negotiate a lower charge as US banks had done prior to settlement.

This comes on the heels of an impending Italian banking crisis that threatens to renew fresh calls for a breakup of the world's largest economic trade bloc, the EU. Currently Italian banks are holding a monumental €360 billion of soured debt on their balance sheets with little to help free up bankers ability to deal with it. Much of the focus has been turned on the world's oldest bank, Monte dei Paschi, who seemingly looks like the weakest link in a long line of exposed institutions.    

Deutsche Bank says to solve problems without help from Berlin https://t.co/4SzoXE9T3v pic.twitter.com/5OTWETYYkK

— Reuters Top News (@Reuters) September 26, 2016

Looking past the calamitous state of affairs, one aspect remains the chief detriment in the destruction of the European financial system which is the issue of low and negative interest rates, a sore topic for most banking institutions in Europe who have bemoaned it's place and suffered gravely as an inability to generate healthy income has been stunted by its protracted implementation.

In the case of Deutsche Bank, management had decided to offset the effects of a slim delivery of earnings through increased exposure in riskier assets, some of which included loans to the US energy sector. All it took was a collapse in oil prices for fear to be released amongst stockholders surrounding the capacity of Deutsche to absorb the losses incurred from non-performing loans when considering the little reserve's built up from bleak earnings.

With Italian banks it's a situation of institutions being in possession of inexpensive liquidity coupled with lowly sustained economic growth that caused government to use banks in averting a crisis. But as what we've seen evolving in the broader EU economy, increased monetary supply didn't lead to the deserved effect so many policymakers had wished for leaving many big name banks in a precarious position of holding onto debt that couldn't be paid for with the absolutely no prospect of growth in the future, only driving the fear of a mass default even closer.

The problem the world has now and more specifically the European Union is deciding what action will yield the least consequences because if we cast our minds on either objective we soon realise that there can be no relief from the pressure if the curtailment isn't dispensed in the other.The ECB is trying so desperately to get European consumers and manufacturers to produce value but in the same breathe pushing the stability of their financial system into jeopardy in reaching its goals.