Lombard lending, explained
Credit against what you already own.
Borrowing against a portfolio has a seven-hundred-year history. This page explains where it comes from, how it works today, and what to weigh before using it.
Available to wholesale clients only, as defined in the Corporations Act 2001 (Cth). Not available to retail clients.
The short answer
A loan secured by investments. Not one secured by property.
Lombard lending is credit secured against liquid financial assets: listed shares, bonds, funds and cash. The borrower keeps the investments and their returns; the lender takes a security interest over them and monitors their value for the life of the loan.
It sits between two things most people know. It is not a mortgage, because nothing is sold or valued once; the security moves every day. And it is not an ordinary margin loan sold to retail investors, because the facility, the collateral rules and the borrower are assessed individually, for wholesale clients, and the purpose can be far broader than buying more shares.
Where the name comes from
Seven centuries of lending against assets.
Lombardy
Merchant families from northern Italy, the Lombards, financed trade across Europe by lending against goods, metals and later paper claims. Pledged assets, valued and held as security, were the basis of the loan.
Private wealth
As portfolios replaced land as the main store of private wealth, Lombard facilities became a core service of private banking in Switzerland, London, Singapore and Hong Kong: liquidity without liquidation.
Infrastructure
What was once a bespoke, relationship-only product can now run on technology: daily instrument-level valuation, automated margining and monitoring, delivered through the platforms and advisers clients already use. That is the gap Volans was built for.
Why people use it
Liquidity without selling.
Timing
A tax bill, a settlement or a short gap between one transaction and the next, without selling a position at a time or price you would not choose.
Staying invested
A sale ends exposure to the asset and may crystallise a capital gain. Borrowing keeps the position and its returns, and keeps the risk.
Business and investment
Working capital, an acquisition, or a new investment funded against the portfolio rather than from it.
General information only. Whether borrowing is better than selling depends on costs, tax, market risk and your ability to meet a margin call. Compare both with your adviser.
A short glossary
The terms you will hear.
Lending value — the portion of a security’s market value a lender will count as collateral.
Facility limit — the maximum that can be drawn, set by the lending values of the pledged portfolio.
LTV — loan to value: the drawn amount as a proportion of the collateral’s market value.
Margin shortfall — when the drawn amount exceeds the facility limit after a fall in values.
Margin call — the lender’s request to restore the position within an agreed period.
Security interest — the lender’s legal claim over the pledged assets.
Wholesale client — a client who meets the Corporations Act tests that take them outside retail protections.
The one-minute version
Lombard lending explained in a minute.
What it is, where it came from, how it works and what to weigh, narrated.
General information only.
Start with a conversation