In summary…
Selling securities to finance a project triggers capital gains tax: it's the sale itself that creates the tax, not the need for money. Borrowing against these same securities finances the project. without triggering this generating event.
The price to pay is not fiscal, it is financial. The bank only lends a fraction of the portfolio's value, and if the pledged assets fall, it calls on the margin — which must be covered in a few days, at the worst possible time.
It's a tool for building up financial assets, not general financing. We advise against it more often than we implement it.
A project emerges—an apartment, a stake in a company, a donation to be made now rather than in ten years—and the first response is: "I'm going to sell a line of credit." It's the most expensive one, and nobody puts a price on it.
1. Selling triggers, borrowing does not.
The triggering event is the transfer of ownership — not the need for money.
A latent capital gain costs nothing: it becomes taxable on the day of the sale, and only on that day. Financing through the sale means voluntarily paying, on a date dictated by the project and not by tax laws, a tax that was not due.
Lombard lending reverses the logic: the bank lends, and takes the securities account as collateral. The securities remain with the client, continue to generate dividends and coupons, and are not sold.
Specifically. You need €600,000. Your shares are worth €1.8 million, you paid €900,000 for them. To receive €600,000 net, you need to sell €745,000 worth, since half of what you sell is capital gain taxed at 30%. You lose €105,000 to get the money you needed. By borrowing against these securities, you receive the €600,000 and keep the €745,000 invested. The tax is not eliminated: it is deferred to a date of your choosing.
For the technician. Article 150-0 A of the French General Tax Code (CGI): Capital gains from the sale of securities and equity interests are taxable in the year of the sale. A single flat-rate levy under Article 200 A (12.8% of %) and social security contributions (17.2% of %, Article L. 136-6 of the French Social Security Code) are levied, totaling 30% of %, unless the taxpayer opts for the progressive tax scale; Article 223 sexies may also apply. Since a pledge does not transfer ownership, it is ineffective under Article 150-0 A. The enforcement of the security, however, constitutes a sale.
2. One does not lend against a portfolio, one lends against a specific amount.
Securities account pledging and coverage ratio
It's a loan, usually in fine, guaranteed by the pledge of a securities account or a capitalization contract. The bank never grants 100% of the value: it discounts each line item according to its volatility and liquidity, and the sum of the discounted values determines the amount loaned.
- Liquidity, money, government bonds — Very high.
- Listed stocks, large-cap stocks — About half.
- Unlisted securities, shares of the manager's company — Outside the standard scale, often excluded.
For the technician. Article L. 211-20 of the Monetary and Financial Code: declaration signed by the holder, basis including registered securities, those substituted for them, and their fruits and proceeds, right of retention, and accelerated enforcement after unsuccessful formal notice. Pledge of intangible assets: Articles 2355 et seq. of the Civil Code. Within the scope of financial guarantees under Articles L. 211-36 et seq., certain rules of insolvency proceedings are waived: very strong security for the lender, and this is communicated to the client.
3. The margin call is the only real risk
What happens when safe-haven assets fall
The contract stipulates a coverage ratio: the discounted value of the pledged assets must remain higher than their outstanding amount. If the market falls, the bank calls on the margin within a few days. The client provides cash or other securities, or repays the loan. Otherwise, the bank enforces the pledge.
Specifically. The market loses 30%, the bank demands €200,000 within eight days, you don't have it. It sells your securities. at its lowest point, and that sale triggers the capital gain.. You're accumulating the loss of market share, the forced sale, and the tax that the arrangement was supposed to avoid. A Lombard loan isn't based on what the bank lends, but on what you absorb without selling.
4. The four uses that hold
Real estate, business transaction, donation, cash flow
Financing a property without breaking an allowance Selling half of a property built for fifteen years to make a down payment is tantamount to demolishing it. If the property is rented, the interest payments fall under the rules for loan interest allocated to the acquisition.
Financing a professional operation — buyback of shares from an outgoing partner, capital increase: the operation has a window, the portfolio should not have to suffer the timing. Donate while keeping the portfolio : borrowing to give clears the allowances within the deadlines. Overcoming a cash flow hurdle : the Lombard covers the interval between the transfer protocol and the payment of the price.
5. When we say no
Three situations where Lombard is the wrong answer
Insufficient financial assets. Below a significant portfolio, the quota generates nothing and a margin call is almost certain.
Credit intended to offset risk. Borrowing against a portfolio to reinvest in stocks is leverage: the exposure doubles in both directions.
Unwritten exit. If the only planned exit is the sale of the pledged securities at maturity, nothing has been avoided: the sale is simply postponed for seven years, plus interest. A clearly defined exit strategy is needed—business sale, future income, or holding until inheritance.
6. The expatriate: credit crosses borders, but guarantees are much less secure.
Where are the titles, where is the property, and which judge decides?
A resident of Geneva, Dubai, or Singapore finances a purchase in France by pledging a portfolio held abroad. Or vice versa. The loan is arranged without difficulty; the guarantee, less so.
Specifically. Three questions before signing. Which law governs the pledge, and does it allow for quick enforcement? Which court does the contract designate—a disputed margin call before a foreign judge is no mere formality? And will the lender follow a non-resident who changes countries again in three years?
For the technician. When leaving France, the transfer of tax residence triggers the taxation of unrealized capital gains on shares and securities under the conditions of Article 167 bis of the French General Tax Code (CGI), with automatic or optional deferral of payment depending on the country of destination. However, when the deferral requires guarantees, securities already pledged as collateral are no longer available: the order of transactions must be decided beforehand, not afterward.
Three questions. If the third one bothers you, don't sign.
Have you calculated the tax that the proposed sale would trigger, based on the cost price? Do you know at what price drop the bank will call, and by how much? And if that call came next month, how would you cover it—without selling?
Our position
A precise tool, for a limited number of cases
Lombard lending is neither a trick nor a product. It's the embodiment of a simple principle: tax arises from the sale of assets, and financing can be achieved without selling. It trades a definite tax cost for an uncertain market risk—a good trade-off for a diversified portfolio, with cash flow free of collateral and a written exit strategy; a bad trade-off everywhere else, and we tell this bluntly to clients who arrive with the structure already decided upon.
You need to finance a project and your first instinct is to sell securities?
The initial meeting calculates both options side-by-side: the tax triggered by the sale on one side, and the cost of credit and margin call on the other. Forty-five minutes, with no obligation — and sometimes the conclusion is that a sale is necessary.
Are you a notary, chartered accountant, broker or fellow consultant? These cases are decided in a matter of days, between a signed agreement and preserving an allocation. We act as a joint contractor on financing and guarantees; the client remains yours, and the case is returned to you with a detailed cost estimate from both parties.
Book an appointment
The initial consultation is to establish your exact situation and determine if there is anything that can be done—sometimes there is nothing, and we will say so as well. Thirty minutes, with no obligation.
