Anyone with even the vaguest interest in our financial sector will have heard of the troubles that have beset the international investment bank Credit Suisse in recent days as it teetered on the brink of collapse – threatening to bring worldwide economies with it.

On March 14, Credit Suisse announced to the world that it had found ‘material weaknesses’ in its financial statements and accounting. This news sent shockwaves through the financial sector as people began to consider the implications this could have.

Depositors in Credit Suisse began to withdraw money in their droves as they feared the over a century old bank could be about to collapse and take their money with it.

This sudden outpouring of cash caused serious liquidity problems for Credit Suisse as they (like many banks would be) were vastly unprepared for withdrawals of this scale.

To try and strengthen the liquidity of Credit Suisse, the Swiss National Bank loaned the institution $50 billion to improve the situation although this had little effect with central banks around the world beginning crisis talks as they began to comprehend the potentially forthcoming crisis.

Swirling doubts about Credit Suisse’s viability shook the financial sector and wiped billions off valuations of banking institutions across the world. Barclays’ shares fell 8%, the FTSE100 fell 3.8% while Credit Suisse’s own share price crashed to record lows with their default swap rates at record highs.

Although this happened at a very fast pace, there have been systemic issues within Credit Suisse that have caused concern for many years. From dubiously lax controls on money laundering to losing $10 billion due to a collapsed investment firm.

Greensill Capital lent money to various businesses and Credit Suisse customers were embroiled in the disgraced scheme through the bank’s asset management arm. After billions of pounds were lost, many senior managers at Credit Suisse lost their jobs and the world was warned of the potential problems deeply rooted in the Swiss institution.

The liquidity crisis caused more problems within Credit Suisse to rise to the surface once more with very real fears about its collapse flooding the financial sector with crisis talks and deals happening to try and rescue the bank from the precipice.

On Saturday March 18, the American investment group Blackrock announced its intentions to acquire or merge with Credit Suisse however that deal failed to come to pass.

Ultimately, Credit Suisse’s largest rival (fellow Swiss investment bank UBS) ended up acquiring the beleaguered company for $3.25 billion – the same valuation as UK sandwich chain Greggs.

Although the deal between the two Swiss conglomerates averted a potential banking crisis, there are still wider issues it poses. The Swiss competition authorities were concerned about the impact it would have on the national economy and wider world to have a ‘super-bank’ however faced with the dire consequences that would have been felt if the deal had not gone through this was mostly dismissed.

Additionally, the takeover has wiped out the value of $17 billion worth of bonds associated with Credit Suisse. Unsurprisingly, this has left investors very disappointed as they feel they have been disadvantaged and ignored in the whole debacle – I feel this will take some sorting out.

Although in UBS saving Credit Suisse from the brink of bankruptcy one disaster has been averted there is still a sense that the financial system is teetering on the edge. Silicon Valley Bank collapsed last week leaving many small businesses out to dry while central banks are remaining cautious and increasing options for financial institutions to expand their liquidity.

I feel that the comings and goings of the financial sector at this time will be an ever changing story and if there are any significant and/or interesting developments I will either update this or write another article.

Do comment your thoughts below.