Lombard loan interest rates & costs.

A Lombard loan's interest rate is priced as a reference rate in the loan's currency — such as SOFR, SONIA, EURIBOR, or SARON — plus a spread. The spread reflects the loan-to-value, the recourse profile, the tenor, and the liquidity and volatility of the collateral. There is no published rate card, because the rate is calibrated to the structure of each facility rather than sold off a shelf.

How a Lombard loan is priced

Almost all institutional lending against securities is priced the same way: a floating benchmark plus a fixed margin. The benchmark — the reference rate — captures the general cost of money in the loan's currency and moves with the market. The margin — the spread — captures the specific risk of this facility, against this collateral, on these terms. Add them together and you have the all-in interest rate. Separating the two is useful, because it shows which part of the cost is market-driven and which part is a function of how the loan is structured.

The reference rate

The reference rate is a published benchmark for the currency in which the loan is drawn. A dollar facility is typically priced over SOFR, a sterling facility over SONIA, a euro facility over EURIBOR, and a Swiss-franc facility over SARON. These rates are set by the market, not by the lender, and they rise and fall with monetary conditions. Because they float, the interest on a floating-rate Lombard loan changes over the life of the facility as the benchmark changes. The choice of reference rate follows the loan currency, which in turn often follows the currency of the collateral or the borrower's needs.

The spread, and what moves it

The spread is where structuring shows up in the price. A tighter spread reflects a facility the lender views as lower risk; a wider spread reflects the opposite. The same drivers that set the loan-to-value move the spread: a diversified, liquid book attracts a tighter spread than a concentrated, volatile single name; a full-recourse structure is tighter than a non-recourse one; a shorter, cleaner tenor is tighter than a long or complex one. In other words, the spread and the LTV are two expressions of the same underlying judgement about the collateral and the terms.

Why structure beats the headline coupon

It is tempting to compare facilities on the interest rate alone, but that can be a false economy. A loan with a slightly lower coupon but a lower loan-to-value may release less cash than needed; one with continuous margining may force a sale at the worst moment; one with full recourse exposes assets a non-recourse structure would ring-fence. The headline rate is one line in a larger picture. The right comparison weighs the coupon against the loan-to-value, the recourse, the tenor, and the margining behaviour together — the structure, not the sticker. A well-structured facility at a fair spread will usually serve a substantial holder better than a cheap one that behaves badly under stress.

Other costs beyond interest

Interest is the main cost, but not the only one. Depending on the facility, there may be an arrangement fee for putting the loan in place, custody costs for holding the pledged collateral with a qualified custodian, and legal or valuation costs where the structure or the collateral is complex. None of this should be a surprise: the firm identifies and discloses the cost components up front, so that the total cost of the facility is clear before you proceed. The table below sets out the pieces.

The cost of a Lombard loan, component by component

Indicative components only. No rate card is published; pricing is confirmed for a specific facility after review. Nothing here is an offer of credit on particular terms.

Getting a rate for your position

Because the rate depends on the currency's reference rate and on a spread specific to the collateral and terms, a meaningful figure follows a short review rather than a rate card. The process establishes indicative terms — loan-to-value, recourse, tenor, and pricing basis — typically within one or two business days of a confidential enquiry. For the instrument itself, see what a Lombard loan is; for the amount, see how much you can borrow against shares.