Lombard Loan

A Lombard loan is a loan granted by a bank or financial institution, secured by financial assets. This mechanism provides financial leverage by allowing access to liquidity without having to sell investments.

 

How a Lombard Loan Works

The Lombard loan is based on a simple yet structured mechanism:

  • Pledging financial securities: the borrower deposits their shares, bonds, or funds with the bank.

  • Determination of the loan amount: the bank grants a percentage of the value of the securities (called loan-to-value, LTV, or lending value). This lending value depends on the volatility and liquidity of the pledged assets.

  • Repayment: the borrower repays the loan according to agreed terms (amortizing or bullet repayment).

Advantages of a Lombard Loan

A Lombard loan offers several strategic benefits for private banking clients:

  • Liquidity without selling financial assets.

  • Flexibility: financing investments, acquisitions (excluding real estate), or short-term liquidity needs.

Risks of a Lombard Loan

Like any financial tool, a Lombard loan involves certain risks:

  • Margin call risk: if the value of the securities declines, the bank may require partial repayment or additional collateral.

  • Debt risk: the borrower must be able to repay the loan even in case of declining financial markets.

Focus on Lombard Loans in Private Banking

In private banking, Lombard loans are a key service designed for clients who wish to leverage their financial asset portfolios while maintaining their investment strategy. Key features include:

  • A tailored offering with a credit line adjusted according to the portfolio composition and the client’s risk profile.

  • A loan secured by diversified assets (shares, bonds, funds, etc.), providing enhanced security for the bank and favorable conditions for the client.

  • A flexible liquidity solution to finance projects, investment opportunities, or personal needs without selling assets.

  • Integration into a comprehensive wealth management strategy, combining financial optimization, wealth protection, and long-term planning.

  • Access to specialized banking services and personalized advice specific to private banking, supporting the client in their financial decision-making.

In Brief – Lombard Loan

  • A Lombard loan is a loan secured by a portfolio of financial securities.

  • It provides quick access to liquidity while preserving investments.

  • Advantages: flexibility to finance various projects.

  • Risks: exposure to market fluctuations and margin calls.

  • Target clients: all private banking clients.