What Is a Lombard Loan? Complete Guide
If you have substantial wealth and are looking for immediate liquidity without parting with your investments, the Lombard loan is one of the most sophisticated tools in modern wealth management. This financing solution, traditionally reserved for private banking clients, lets you obtain funding using your securities portfolio as collateral.
What exactly is a Lombard loan?
A Lombard loan is a loan secured by financial assets that the client keeps as collateral without having to sell them. Unlike a traditional mortgage, where you use your home as security, here you use your investment portfolio: shares, bonds, investment funds or term deposits.
Historical origin: the Lombard bankers of the 13th century
The name comes from the Italian region of Lombardy, where bankers had been offering loans against valuable assets since the 13th century. The practice, which began with jewelry and works of art, evolved into the foundation of the modern financial system for large fortunes.
A practical example for large estates
A €2 million portfolio
Imagine you hold a €2,000,000 portfolio diversified as follows:
- €800,000 in German government bonds
- €700,000 in DAX and SMI shares
- €500,000 in diversified investment funds
| Asset Type | Percentage You Can Borrow Against |
| Government bonds | Up to 80% |
| Large-cap shares | 50%-70% |
| Investment funds | 50%-70% |
| Term deposits | Up to 95% |
With this portfolio, you could access up to €1,395,000 in immediate liquidity while your assets keep generating returns.
Advantages of the Lombard loan for large estates
- Immediate access to seven-figure liquidity
Private banks can structure multi-million financing in 24-48 hours, as in the documented Rothschild & Co case in which a client financed the buyback of his own company using a Lombard loan.
- Advanced tax optimization
The "Buy, Borrow, Die" strategy: Anglo-Saxon wealth holders use this technique to avoid capital gains taxation, keeping appreciated assets as collateral while obtaining liquidity through credit.
- Flexibility in wealth management
- Dynamic portfolio changes: You can sell German bonds and buy Swiss shares, with the lendable percentage adjusting automatically
- Scalability: If your portfolio grows from €2M to €2.5M, your borrowing capacity increases proportionally
- Complex structuring: Financing can be arranged through trusts, family offices or corporate structures
Specific risks for large estates
- Margin calls on multi-million portfolios
With volatility of 20-30% in bear markets, a €2M portfolio could fall to €1.4M. If you have €1.2M financed at 70% LTV, you would need to post an additional €360,000 or repay part of the loan.
- Amplified leverage effect
In multi-million portfolios, leverage magnifies both gains and losses. A 15% fall in a €3M portfolio with €2M financed means €450,000 in real losses.
- Institutions specializing in large estates
Costs and conditions for large estates
Rate structure (indicative)
- AAA bonds: Euribor + 0.75% - 1.25%
- Diversified portfolios: Euribor + 1.50% - 2.50%
- Alternative assets: Euribor + 2.50% - 4.00%
Example of annual cost
With €1.5M financed at a 4% APR (TAE):
- Annual financing cost: €60,000
- Expected portfolio return: 6% = €120,000
- Net benefit: €60,000 a year while keeping your position
Who is it designed for?
The Lombard loan is designed for wealth holders who seek financial sophistication without operational complexity:
- Wealth from €500,000: Basic access to Lombard products
- Wealth from €2,000,000: Preferential terms and personalized management
- Wealth from €10,000,000: Fully customized structures
Conclusion
The Lombard loan is not just a liquidity tool — it is a key piece of modern wealth architecture. For sizeable estates, it makes the difference between managing wealth reactively or proactively.
The key is understanding that not all Lombard loans are the same: conditions, flexibility and terms vary significantly depending on the institution and the size of the estate.
Do you manage wealth above €500,000 and need to optimize your liquidity? The first step is to assess, together with a private banking specialist, the specific options for your wealth profile and investment goals.
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