Lombard Credit: Finance Your Projects Without Selling Your Assets
Portfolio pledging, the discreet lever of great fortunes, now accessible to portfolios from €300,000
- Lombard credit provides liquidity (50–80% of portfolio value) without selling securities — no capital gains tax triggered at disposal
- Tax savings can reach €9,000 per €100,000 of unrealised gains (30% flat tax avoided under the French PFU regime)
- Current rates (EURIBOR + 1–2.5%) remain below the tax cost of a disposal in most wealth configurations
- The primary risk is a margin call: if the portfolio falls, the bank may require immediate partial repayment
- Luxembourg life insurance is the ideal collateral: legal protection, asset diversity, internal tax neutrality, and preserved estate planning benefits
What Is Lombard Credit?
Lombard credit — also known as a pledge loan or securities-backed loan — is a bank loan secured by a portfolio of securities provided as collateral. Unlike a mortgage or personal loan, the lender does not require justification of fund usage: you may use the liquidity to finance real estate, seize an investment opportunity, fund renovations, or simply bridge an income transition.
The principle is straightforward. You pledge your securities (UCITS, bonds, listed equities, life insurance contracts) to the bank as collateral. The bank then lends you typically between 50% and 80% of the portfolio’s market value, depending on the quality and liquidity of the underlying assets. Your securities are not sold: they remain in your estate, continue to receive dividends and coupons, and benefit from any future market appreciation.
This technique, ubiquitous in family offices and private banks for decades, is gradually becoming more accessible. Several institutions now offer it to financial portfolios of €300,000 to €500,000 — well below the thresholds traditionally reserved for Ultra High Net Worth clients.
« Great fortunes never sell. They borrow. That is how they maintain their positions while continuing to deploy capital. »Fundamental principle of private wealth management
The Tax Arbitrage: Sell or Pledge?
This is where Lombard credit reveals its full power. Consider an investor holding a €300,000 UCITS portfolio acquired six years ago for €180,000. Their unrealised gain is €120,000. They wish to have €150,000 in liquidity to finance the acquisition of a property in Provence.
Option A — Sale: They dispose of part of the portfolio. The realised gain, subject to the flat tax (PFU) of 30%, costs approximately €36,000 in taxes. The residual portfolio is depleted, and future growth potential is reduced.
Option B — Lombard credit: They pledge €200,000 of the portfolio (75% ratio), obtaining €150,000 in credit. No disposal, no taxable gain. The full portfolio continues to compound. The borrowing cost at EURIBOR 3M + 1.8% (approximately 4.1% in July 2026) over three years represents approximately €18,500 in interest — nearly half the avoided tax cost.
Practical Mechanics and Access Conditions
Setting up a Lombard credit follows a relatively smooth process, particularly within private banking institutions. The key steps are as follows:
Assessment of pledgeable portfolio. The bank analyses the quality, liquidity, and volatility of assets. Investment-grade bond UCITS and money market funds are eligible up to 80% of their value. Individual equities or more volatile funds are advanced at 50–60%. Illiquid assets (private equity, SCPI, complex structured products) are generally excluded.
Rates and tenure. In July 2026, the 3-month EURIBOR is around 2.3%. Bank margins range from 1.0% (very high-quality portfolios, privileged client relationships) to 2.5% (more concentrated portfolios). Lombard credit is typically a short to medium-term facility (1–5 years), renewable, with the possibility of early repayment without penalty.
Minimum amounts. Most institutions require a pledgeable portfolio of at least €200,000 to €500,000 and a minimum credit amount of €100,000. Some fintech platforms offer lower entry thresholds, but typically at higher rates.
| Pledgeable Asset Type | Advance Ratio | Risk Profile | Note |
|---|---|---|---|
| IG bond UCITS / money market funds | 75–80% | Low | Preferred collateral |
| Balanced diversified UCITS | 65–75% | Moderate | Very common |
| Listed large-cap equities | 50–65% | Moderate to high | Higher margin call risk |
| Luxembourg life insurance | 70–80% | Varies by underlying | Ideal pledging vehicle |
| SCPI / private equity | 0–40% | High | Illiquidity penalised |
Luxembourg Life Insurance: The Ideal Vehicle
Among all pledgeable assets, the Luxembourg law life insurance contract stands out as the collateral of choice for Lombard credit. The reasons are multiple and cumulative.
First, the legal protection provided by the Luxembourg safety triangle (asset segregation, policyholder super-privilege) confers unparalleled security upon the contract. In the event of the insurance company’s failure, the subscriber’s assets are fully protected.
Second, Luxembourg life insurance allows investment in a very broad range of funds (UCITS, ETFs, dedicated funds, direct bonds) without the constraints of French life insurance. The internal tax neutrality of the contract — internal arbitrages generate no taxable event — preserves the overall economics of the strategy.
Third, daily valuation and liquidity of underlying assets allow the bank to grant high advance ratios (70–80%), thereby reducing the overall cost of the credit facility.
Finally, upon death, the life insurance contract passed outside the estate benefits from the abatements under Article 990 I of the French Tax Code (€152,500 per beneficiary). The Lombard credit secured against the contract does not alter this estate planning advantage, making it a dual-trigger strategy: immediate liquidity + optimised estate transmission.
Risks and Precautions to Master
Margin Call
If the pledged portfolio value falls below the coverage threshold (generally 110% of the loan amount), the bank requires immediate partial repayment or additional collateral. In a bear market, this can force a distressed sale — the precise scenario the strategy aims to avoid.
Variable Credit Cost
Indexed to EURIBOR, the Lombard credit rate can rise if monetary conditions tighten. A re-inflation scenario would force reassessment of the sale-vs-pledge arbitrage. It is advisable to set a maximum tolerable rate before implementation.
Dependency Risk
Systematic and maximum use of Lombard credit can create dangerous leverage on overall wealth. Lombard credit is a liquidity tool, not a speculation tool: it aims to avoid an untimely disposal, not to amplify risky positions.
- Lombard credit is the preferred strategy of large fortunes for obtaining liquidity without triggering taxation on unrealised gains
- In July 2026, borrowing at 4–5% remains cheaper than the 30% flat tax applied to a disposal in most wealth configurations
- Luxembourg life insurance is the ideal collateral: legal protection, internal tax neutrality, high advance ratio and preserved estate planning benefit
- Maintain a conservative utilisation ratio (50–60%) to avoid any margin call in the event of a market correction
- This strategy requires rigorous monitoring and accompaniment by an independent wealth management advisor
This document is provided for informational purposes only and does not constitute investment advice, a personalised recommendation, or an offer to buy or sell financial products. Past performance is not indicative of future results. All investments carry risks, including the risk of loss of capital. The information contained in this article reflects Riviera Wealth Management’s analysis as of the publication date and is subject to change. Riviera Wealth Management is an independent financial investment advisor (CIF), registered with ORIAS and a member of CNCGP.
