On Wednesday, 15th of March, 2023, you might have woken up to see your investment portfolio devastated, and wondering what happened overnight? Was it another bank that broke down? Was it a bad earnings report? Did something happen in regards to the collision between the US drone and the Russian fighter jet (a story from the previous day)? Did something bad happen in politics?

The answer, and you should know by now, is that it was a news story that had come out overnight on Credit Suisse, the Swiss major bank. Essentially what happened is that its share price dropped nearly 25% after Saudi National Bank, its largest investor, said it could not provide more financial assistance. The Saudi’s had already invested close to the 10% mark into the bank. If they invested more it would have required a lot of regulatory hurdles to be overcome - one of the key reasons they suggested why they had no plans of putting any more capital into the bank.

The End

By this time almost everyone was aware of the issues at Credit Suisse - its troubles were many years in the making. So, in many ways this story should not have spooked anybody. But it did. It spooked people and institutions to an extent that clients started to pull their assets and institutions pulling credit. This pushed Credit Suisse into a spiral that spun so fast out of control that the whole episode ended by the following weekend - on Sunday, 19th of March, 2023, when the Swiss government arranged what is called a “shotgun marriage" with UBS. Credit Suisse was bought by UBS for USD $3.25 billion (CHF 3 billion). That was basically a close to 65% markdown on per share price as compared to CS’s Friday’s share price. There was one other thing that was unusual in this fire-sale merger, it saw about $17.3 billion of bonds being wiped out while equity holdings survived (although at a lower valuation).

As I mentioned before this was only the final episode in Credit Suisse’s life. But, to know exactly what happened, you have to look at its entire life, and more specifically the last few years.

Timeline of Credit Suisse collapse

• 1856:

  • The institution was founded as Swiss Credit Institution

• 2007:

  • During the 2007–2008 global financial crisis, Credit Suisse found itself in better financial shape compared to its peer banks

• 2019:

  • A senior executive who was leaving the firm discovered that the COO of Credit Suisse at the time, had hired private detectives to follow him to see if he was wooing Credit Suisse clients. The COO was fired, and a private investigator involved in the surveillance apparently killed himself.

• 2021:

  • March, 2021:

    • Credit Suisse closed and liquidated several supply-chain investment funds tied to the activities of Greensill Capital.

  • April, 2021:

    • Credit Suisse reported losses of $4.7 billion linked to its prime brokerage services provided to Archegos Capital.

• 2023:

  • 15 March (Wednesday), 2023:

    • Credit Suisse' share price dropped nearly 25 percent after Saudi National Bank, its largest investor, said it could not provide more financial assistance

  • 16 March (Thursday), 2023:

    • Credit Suisse tries to shore up their finances by taking a loan of 50 billion Swiss francs from the Swiss National Bank

  • 17 March (Friday), 2023:

  • 18 March (Saturday), 2023:

  • 19 March (Sunday), 2023:

    • Credit Suisse was bought by UBS for USD $3.25 billion (CHF 3 billion)

References:

• Wikipedia article