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.
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