Glossary
Lombard Loan
A Lombard Loan is a loan secured against pledged securities or other liquid assets. It provides investors with liquidity without requiring them to sell their portfolio. The amount that can be borrowed depends on the lending value assigned to the pledged securities.
At a glance
01
Pledged securities serve as collateral; the loan-to-value ratio depends on the type and quality of the securities.
02
If the value of the collateral falls below a threshold, the bank may demand additional collateral or liquidate positions (margin call).
03
A Lombard Loan creates liquidity but increases the overall portfolio risk through leverage.
Frequently asked questions
A Lombard Loan acts as leverage: when the portfolio rises, the effect is amplified; when it falls, losses are magnified. If the value of the pledged securities drops below the agreed threshold, the bank may demand additional collateral or force-liquidate positions. A careful assessment of debt-servicing capacity is therefore central.
