Lehman's shares closed at their lowest level for almost five years.

Lehman Brothers, one of America's largest investment banks, has denied rumours it is facing funding problems.

The firm told investors that it had not borrowed money from the US Federal Reserve on Tuesday and had liquidity of "well above" $40bn (£20.4bn).

The denials, however, failed to reassure the market, as Lehman Brothers' shares closed down 10%.

There was also speculation the bank would have to raise up to $4bn in additional capital from investors.

In March, Lehman Brothers raised $3bn from shareholders to bolster its balance sheet.

At that time, it had to counter reports it was suffering from similar problems to Bear Stearns which collapsed after confidence in the bank failed and clients withdrew funds.

"We did not access the primary broker-dealer facility," said Lehman Brothers Treasurer Paolo Tonucci, speaking about a US Federal Reserve lending facility available on Tuesday.

"The last time we accessed the facility was on 16 April for testing purposes. We ended the first quarter with liquidity of $34 billion and finished the second quarter with well over $40 billion," he said.





