retained
useful
Liquidity bridge
A Lombard loan: fund your project without selling your investments. Keep a safety margin
A Lombard loan provides access to cash against your invested assets. Its resilience depends on the headroom, the agreement and how it handles a fall in asset values.
Obtaining liquidity without selling its assets does not remove the risk.
It moves him.
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Fund your project while keeping room to manoeuvre
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Compare your financing options
Compare selling investments, borrowing and using cash you already have.
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Look at the total cost
Review the interest, fees, term and repayment conditions, not just the amount you could borrow.
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Plan for a fall in value
Check the collateral terms and the risk of a forced sale before pledging your investments.
Planning a purchase or a loan? Check feasibility before signing. The loan remains subject to the lender's approval.
Direct response
Borrow against your investments: what are the conditions?
A Lombard loan is a financing secured by financial assets or a like security, according to the contract, establishment and jurisdiction. The assets are not sold immediately: they are used as collateral.
The lender applies a reduction, or haircut, to market value when calculating collateral value. Its rules take account of liquidity, volatility, concentration, currency and the type of assets.
As well as asking how much you can borrow, consider the margin left if your investments fall, interest rates rise or the exchange rate or project changes unfavourably.
The real question: what margin can you keep if the scenario becomes less favourable?
How it works
How does the loan work?
Start with the project, then examine the financing and the margin you would need if conditions become less favourable.
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You need money for a project while your wealth remains invested. Compare selling, waiting, borrowing and reconsidering the project.
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Selling can trigger tax, crystallise a loss or end an investment you wanted to keep. Borrowing lets you keep the assets, but adds debt and contractual obligations.
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Part of the value of your investments secures the loan. The lender makes funds available when it considers the collateral sufficient.
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If collateral value falls, your remaining margin shrinks. An initially comfortable position can become restrictive.
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Set a borrowing amount you can withstand in a downturn before it happens, rather than waiting for a margin call.
How it works
How much headroom will you have after borrowing?
The bank assesses eligible assets, applies a haircut to their value, sets a borrowing limit and monitors the remaining headroom throughout the loan.
An example to understand the margin
- 01 Market value 100 units
- 02 Collateral value after the haircut 60 units
- 03 Amount borrowed 35 units
- 04 Remaining margin 25 units
For illustration only. These figures are not a lending haircut, borrowing capacity or recommendation for an actual situation.
- Identify assets that the lender agrees to study.
- Check collateral value after the haircut. It is different from market value.
- Decide how much of the credit limit your project actually needs.
- Keep enough margin to cope with less favourable conditions.
How does the bank value your collateral?
This depends on the lender, the agreement and the assets. An asset may have a market value yet count for little or nothing as collateral. There is no universal threshold, rate or loan-to-value ratio on this page.
Margin reduction
Unfavorable scenario
When collateral value falls, your headroom shrinks
The central risk is not only the decline in assets, it is the combination of fluctuating assets, a debt that remains due and clauses that can speed up decisions.
- Collateral value
- 60 units
- Amount borrowed
- 35 units
- Collateral value
- 45 units
- Amount borrowed
- 35 units
Let's discuss the amount you need, your investments and the risks to examine.
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Possible consequences under the contract
- reduction of the limit available
- a request for partial repayment
- request for additional guarantee
- margin call
- sale of securities or assets according to contract
- restrictions on certain movements
A margin call does not guarantee you a protected period in which to act. Deadlines and the lender's powers depend on the agreement.
Terms, interest rates and currency
Which clauses could require you to act quickly?
The banking documents cited are identified examples, never universal rules.
| Term | Question to ask |
|---|---|
| Eligible assets | What assets are accepted, excluded or valued at zero? |
| Guarantee value | How is collateral value calculated, and can it change? |
| Credit limit | Can the limit be reduced and under what conditions? |
| Margin call | How will you be notified, how long will you have to respond, and what happens if you do not? |
| Lender action | Does the contract provide for a sale or quick action in certain cases? |
| Use of funds | Is the proposed project authorized or restricted by the institution? |
| Interest rates and fees | What are the base rate, lender's margin, fees and default interest rate? |
| Currency | Does the currency of the loan, assets and project create a foreign exchange risk? |
| Duration and reimbursement | Does the loan have a fixed term, renew automatically, require a final lump-sum repayment or become repayable on demand? |
Interest rates and currency: what to check
- fixed, variable, indexed or base-rate terms
- Lender's margin, additional fees and costs if you default
- currency of loan, assets and project
- how often interest is calculated and debited
- the effect of higher interest rates or an adverse exchange rate
Decision
Is this funding suitable for your project?
The page helps to recognize cases where the study makes sense and those where the margin or clauses make the operation fragile.
Worth examining when
- a project requires liquidity without immediate sale
- the sale would create an unwanted tax, financial or strategic consequence
- the assets are sufficiently transparent, liquid and diversified for the lender to assess
- a realistic source of repayment exists
- other resources are available to cover a stressed scenario
- the financing fits with your wider financial plans
Pause or avoid it when
- the project requires to use all the maximum proposed
- the remaining margin depends on a concentrated or highly volatile portfolio
- the source of repayment remains unclear
- the person could not react quickly to a guarantee request
- The use of funds is prohibited or ambiguous
- you do not understand the tax consequences, currency exposure or terms
Talk it through with Gary
Have a project or a loan offer to review?
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9 verifications
What to check before borrowing
Use these questions when reviewing a loan offer, contract or project, before choosing an amount.
- 01
What project do you finance, on what horizon and with what source of reimbursement?
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What assets does the lender actually accept?
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What collateral value is used after the haircut, and how could it change?
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How much of the credit limit will you use?
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What margin remains if the scenario becomes less favourable?
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What time frame, channel and consequences in case of margin call?
- 07
In what cases can the lender sell or close assets?
- 08
What is the total cost, taking account of interest, currency, fees and term?
- 09
What rules apply depending on the residence, assets, contract and country of the lender?
Printable Guide
Lombard loans: nine checks before you commit
A short checklist to help you read a bank's offer and prepare your questions before we speak.
- Print version
- questions to ask the lender
- Schedule of clauses
- interest rate, currency and fee checklist
- preparing your meeting
Questions and sources
Five questions to answer before choosing a loan amount
Can a Lombard loan really let me avoid selling my investments?
It can avoid an immediate sale. But the assets are given as collateral and can be sold in certain scenarios under the contract.
Is the amount proposed by the bank necessarily prudent?
Not necessarily. The bank's limit reflects its lending and collateral rules. Your own financial position may call for borrowing less than the maximum offered.
Are all financial assets eligible?
No. Eligibility depends on the institution, contract, liquidity, volatility, currency, concentration and type of asset.
Can a Luxembourg life insurance policy always be pledged as collateral?
No. This needs checking for the specific policy, insurer, custodian, lender, investments, beneficiary, country of residence and applicable rules. Understanding the functioning of Luxembourg life insurance
Does a margin call always give me time to react?
No. Contractual conditions prevail. Time limits can be very short and some contracts provide for quick action in specific circumstances.
Sources used for this page
These sources include institutional publications, legal texts and examples from lenders. They help explain the subject but do not replace your contract or an individual review.
Institutional sources
- CSSF — Questions and answers on Circular 22/824
Luxembourg's prudential framework and transparency requirements within its scope.
- CSSF — Circular 22/824 and EBA guidelines
Loan governance, origination, valuation and monitoring; not a substitute for an individual contract.
- ACPR — French Banking and Insurance Authority
General institutional source, not specific product documentation.
- CAA Luxembourg — Insurance supervision
General institutional source. It does not establish the eligibility of a particular policy.
Legal texts
- Légifrance — French Insurance Code, Article L132-10
French legal reference on pledging an insurance policy; it does not confirm a bank's acceptance.
- Légifrance — French Monetary and Financial Code, Article L211-20
French legal reference on pledging a securities account and the formal requirements.
Bank or contractual documentation used as examples
- Swissquote — Lombard lending: flexible financing
Example of bank offer, without generalisation of permitted rates, currencies or uses.
- Swissquote — Secured loan agreement
Contractual example identified to read the lender's margin, limit and action clauses.
- UBS — Lombard loans FAQ
Lender FAQ explaining risk, safety margins, interest rates and currencies.
- Lombard Odier — Base rates for fixed-term loans
Example of reading base rates by currency, without Martins Patrimoine rates.
- BoursoBank — What is a Lombard loan?
Example of an institution-specific offer and restrictions.
- BoursoBank — Luxembourg life insurance and Lombard loan
Example showing that a Luxembourg contract is not automatically accepted everywhere.
Conclusion
Let's discuss your project and the margin you need to keep
Collateral value, amount borrowed, a fall in value, interest rates, currency and terms: the first conversation helps decide whether a detailed review is worthwhile.
40 minutes · Confidential · No obligation · Directly with Gary Martins