The global economy has taken its first second third fourth victim.

Silvergate Capital — shut down and liquidated.

Signature Bank — collapsed and acquired.

SVB Financial, parent of Silicon Valley Bank — filed for Chapter 11 bankruptcy.

Investors have narrowly escaped what could’ve been two financial disasters — first SVB, and now Credit Suisse.

Flashback: The problems at Swiss bank Credit Suisse escalated last week — as customers withdrew as much as $10B a day from the bank. Some saw Credit Suisse’s collapse as potentially triggering another global financial crisis.

Risk was so high — that Swiss regulators had to step in

Last Wednesday, the Swiss National Bank said it would lend up to $54B to Credit Suisse.

By Sunday, Swiss authorities had forced an acquisition between the largest and second-largest Swiss banks:

• UBS (NYSE:UBS) is buying Credit Suisse (NYSE:CS) for $3.2B.
• The offer price is nearly 60% belowCS
  ’ trading price before the acquisition.

While a transaction like this normally requires a shareholder vote — Swiss authorities are changing their laws to bypass this one. “I have never seen such measures taken; it shows how bad the situation is” — CEO of Ethos Foundation (FT).

Central banks across the world chimed in, saying the move was important in taking the pressure off banks.

Another crisis averted, but not everyone is happy

1/ Credit Suisse employees — who stand to face mass layoffs. CS was already in the process of laying off 9K employees, but with the takeover, the final number could be several times that number, per insiders.

2/ Credit Suisse AT1 bondholders are taking massive losses. CS shareholders will receive nearly $3B as part of the deal, while Credit Suisse AT1 bondholders will lose $17B.

This is controversial because: In such an event, lenders would typically get paid before shareholders. But the government-set terms of the deal were unique, leaving AT1 bonds worthless.

Why does this matter? The market for AT1 bonds is worth $275B. The surprise move by the Swiss led to other lenders questioning whether the same thing could happen with their AT1 bonds.

In the past two weeks, the average value of these bonds has already fallen 20%. And this leads to even more pressure on an already fragile financial system.