Lombard Lending and Securities-Backed Loans: Borrowing Against Your Portfolio

For high-net-worth individuals with significant investment portfolios, Lombard lending offers a powerful tool: access to liquidity without selling investments. It is widely used in private banking but poorly understood by many clients, including some who hold it. Understanding both the opportunity and the risk is essential before using this facility.

What Lombard Lending Is

A Lombard loan is simply a loan secured against an investment portfolio. The portfolio is pledged as collateral to the bank; in most structures it remains invested and continues to generate returns. You receive a cash loan — a revolving credit facility in most cases — that you can draw down and repay on a flexible basis.

The name comes from the Lombard bankers of medieval Italy, who were among the earliest practitioners of lending against pledged assets — their approach, of accepting valuables as collateral for cash loans, is recognisably the same structure used in today's private banking.

Typical Terms

Loan to value: Most Lombard facilities advance 50–70% of the portfolio's market value. A portfolio of £2 million invested in diversified, liquid securities might support a Lombard facility of £1 million to £1.4 million. The precise LTV depends on portfolio composition.

Eligible collateral: Liquid listed equities and investment-grade bonds receive the most favourable LTV treatment. Large-cap equities in developed markets are typically valued at 60–70% of market value for facility purposes. Concentrated positions — where a single stock represents more than 10–20% of the portfolio — are often haircut more aggressively or excluded. Private equity, hedge funds, property funds, and other illiquid alternative assets are generally not accepted as collateral, or are accepted at conservative valuations.

Interest rate: Lombard facilities are priced as a benchmark rate (SONIA for GBP, SOFR for USD, EURIBOR for EUR) plus a margin. Margins typically range from 0.5% to 2.5% depending on relationship depth and portfolio quality. The rate is variable. In the 2026 rate environment, GBP total costs are typically in the 5–7% range.

Facility structure: Most Lombard facilities operate as revolving credit lines — you draw down what you need, repay when convenient, and redraw if required. There is no fixed repayment schedule in most structures, though banks will review the facility periodically.

The Use Cases

Property purchase without portfolio liquidation: This is among the most common uses. You want to purchase a property — whether as a home, a second home, or an investment — but do not want to sell your investment portfolio to fund the deposit or the full purchase. A Lombard loan provides the cash, you complete the property purchase, and you retain your portfolio's market exposure. This is particularly valuable if the portfolio contains positions with significant embedded capital gains that you wish to defer.

Tax deferral: Selling investments to access cash triggers a capital gains tax liability (at up to 24% in the UK as of 2026 for higher rate taxpayers on investment gains). Borrowing against the portfolio instead does not trigger a disposal and therefore does not trigger CGT. The tax is deferred until you eventually sell.

Business opportunity: A time-sensitive investment opportunity — a business deal, a short-term market opportunity, a co-investment alongside a fund — requires capital quickly. Liquidating an investment portfolio takes time and has tax costs; drawing on a Lombard facility can be done within days.

Liquidity bridge during property sale: You are selling a property and wish to purchase a new one before the sale completes. A Lombard loan bridges the gap rather than disrupting the investment portfolio.

Liquidity during estate administration: During the administration of an estate, assets may be illiquid while probate proceeds. A Lombard loan against the investment portfolio element can provide the estate's executors with working capital.

The Risks: Margin Calls and Leverage

Lombard lending is a form of leverage. Leverage amplifies returns in rising markets and amplifies losses in falling markets. Understanding the margin call mechanism is not optional — it is essential before entering a Lombard arrangement.

The margin call: If the portfolio falls in value — whether through market moves, adverse asset performance, or a concentrated position blowing up — the loan may exceed the facility's LTV limit. When this happens, the bank issues a margin call: a demand to either repay part of the loan, deposit additional assets as collateral, or both. The timeframe for response is typically two to five business days.

Forced selling at the wrong time: If you cannot meet a margin call — because you do not have liquid assets outside the portfolio to use, or because you cannot sell other assets quickly enough — the bank has the contractual right to sell portfolio assets to restore the LTV. This forced selling may happen at exactly the moment when market prices are lowest, locking in losses at the worst possible time.

The 2008 precedent: The 2008 financial crisis produced significant documented cases of Lombard and margin call cascades. Portfolios fell 30–50% in value; margin calls were issued; clients who could not respond saw their portfolios sold at distressed prices; the sales added to market pressure; further falls triggered further margin calls. For clients with concentrated portfolios, the consequences were severe.

Correlation risk: A portfolio that is concentrated in a single sector or geography may be highly correlated with the economic events that also affect the borrower's ability to service the loan or meet a margin call. An executive with significant equity in their employer's stock, using a Lombard loan to buy property, faces a risk where adverse news affecting the employer hits the portfolio and the property market simultaneously.

Portfolio Quality and the LTV Calculation

The bank's LTV calculation is not simply a percentage of market value. It reflects the bank's assessment of how quickly and reliably the portfolio could be liquidated in adverse conditions.

Highly liquid, diversified portfolios (FTSE 100 and S&P 500 equities, investment-grade government and corporate bonds, large-cap global equities): typically 60–70% LTV.

Less liquid or concentrated positions (single stock above 20% of portfolio, smaller-cap equities, high-yield bonds): lower LTV treatment, possibly 40–50%.

Alternative assets (private equity, hedge fund interests, property funds): often excluded or valued at 20–30% for LTV purposes if accepted at all.

Cash: Typically 95%+ LTV — cash is the most reliable collateral.

Understanding your portfolio's effective LTV is important before setting the facility limit and planning how much to borrow.

Cost-Benefit Analysis

The mathematics of Lombard lending depends on the relationship between the cost of the loan and the return on the pledged portfolio.

In a normal market environment: if the portfolio generates 7–8% per annum and the Lombard loan costs 5–6% per annum, the borrowing cost is covered by the portfolio's expected return with a margin. The strategy of remaining invested while accessing liquidity makes financial sense.

In a falling market: if the portfolio falls 20% while you are carrying a Lombard loan at 60% LTV, your effective LTV is now 75% — approaching or exceeding the bank's limit. The portfolio loss is real; the loan remains constant. The mathematics becomes adverse exactly when market conditions are most stressful.

The implicit assumption behind Lombard lending — that the portfolio will continue to generate returns sufficient to justify the borrowing cost — is an assumption that markets will co-operate. They do not always do so.

How Private Banks Structure Lombard Facilities

Most private banks offer Lombard facilities as a standard product for clients with managed portfolios. The facility limit is set at the outset, reviewed periodically, and can be adjusted as portfolio values change.

Clients with discretionary investment mandates (where the bank manages the portfolio) often find Lombard facilities more readily available, because the bank has full visibility of the portfolio composition and can monitor the LTV on a real-time basis.

Advisory mandate clients (where the client makes investment decisions) can also access Lombard facilities but may find the collateral assessment process more involved.

How Global Investments Can Help

Lombard lending is a sophisticated tool that sits at the intersection of investment management, tax planning, and liquidity strategy. The decision to use one — and how to structure it — requires an integrated view of your full financial position.

Global Investments works with high-net-worth clients to assess whether Lombard lending is appropriate for their circumstances, how to structure facilities to minimise margin call risk, and how to integrate secured borrowing with broader estate and investment planning. Contact our team to discuss your situation.

This guide provides general information about Lombard and securities-backed lending as of 2026. Terms, interest rates, and LTV ratios vary by institution, portfolio composition, and market conditions. Nothing in this guide constitutes financial, investment, or credit advice. Borrowing against investments involves significant risks, including the risk of loss greater than the original investment value. Seek independent professional advice before entering any securities-backed lending arrangement. Investment values can fall as well as rise.