What is Lombard loan?
Also known as: securities-backed loan
A loan granted against a pledge of the borrower's securities or other financial assets. The client obtains money without selling the portfolio: the shares and bonds remain their property but are pledged in favour of the bank. The bank lends not the full value of the asset but a part of it (the "lending value"); this share depends on how volatile the asset's price is and how quickly it can be sold. The main risk: if the pledged securities fall in price, the bank demands additional collateral or partial repayment of the debt, and if the client does not provide it, the bank may sell the collateral. In central banking language, "Lombard" also means a short-term loan granted to commercial banks against a pledge of securities.
Source: Societe Generale Private Banking: Lombard loan; PostFinance: Lombard loans; Deutsche Bundesbank glossary: Lombard loan