Lombard loan is the term used in banking for a short to medium-term loan against the provision of collateral in the form of pledging securities , bank balances or movable property . The pawnbroker's pawnshop is also one of the Lombard loans.
The term Lombard loan is derived from the northern Italian region of Lombardy , in which money was lent in exchange for pledges as early as the Middle Ages. The first evidence can already be found around the year 1400, when merchants granted loans to feudal lords and nobles in return for pledges and thus contributed to the rise of northern Italian trading houses. The Florentine banking house Compagnia dei Bardi , which had a business relationship with the English royal family in the 14th century and was sold to Edward III in 1344, should be emphasized . Had awarded 900,000 gold florins . This form of credit then became popular in France, where pawn shops established themselves as maison de lombard in Paris . Their form of business then spread across Europe. As can be seen in the Netherlands in 1477 there was a pawnshop that offered “a 'Lombaerd' to all those who have pawns”. In Germany, the term Lombard was first mentioned in 1717. Lombard Street in London with the Bank of England and the Royal Exchange took its name from Lombardy.
The Lombard loan is a loan according to BGB . By this loan as collateral underlying pledge is financial institution direct or indirect owner of the pledged property ( BGB) and takes the object in custody or let him keep ( BGB). As handover -Ersatz are assignment or pledge of the claim for (§ 1205, para. 2 BGB) and the granting of co-ownership ( permitted BGB). If indirect ownership is transferred instead of handover, notification to the immediate owner is required (Section 1205 (2) BGB). The borrower or security provider remains the owner of the pledged item. Possession entitles the bank to realize the pledged item if the borrower violates his payment obligations under the loan agreement and the claim is due ( (2) BGB). The exploitation may only be carried out one month after the threat ( (2) BGB) and, in the case of objects with a stock exchange or market price, must be done privately, i.e. via the stock exchange or a broker ( BGB).
In terms of banking and supervisory law, the EU- wide Capital Adequacy Ordinance (CRR) regulates that a credit institution grants a loan for Lombard transactions in connection with the purchase, sale, holding or trading of securities (Art. 272 No. 3 CRR). This legal definition assumes that any transaction in securities involves the granting of credit as a Lombard transaction. Since securities play a role here as collateral for loans, the collateral assessment must be carried out in accordance with the principles of the Capital Adequacy Ordinance.
The term Lombard loan is used to describe a large number of types of credit, which regularly focus on the pledging of assets as collateral. The types are differentiated according to the deposit objects.
Lombard loan from central banks
Until the European Central Bank (ECB) was founded in June 1998, the national European central banks, such as the Deutsche Bundesbank , provided their affiliated credit institutions with Lombard loans against lending on securities eligible for bombardment as part of their monetary policy . This enables the credit institutions to obtain the liquidity they need. The securities on loan must be owned by the credit institution ( deposit A ). At the Bundesbank, the granting of a Lombard loan to the credit institutions was limited to a term of three months. The interest rate on Lombard loans was called the Lombard rate and was an important indicator of the money market .
With the transfer of responsibility for monetary policy to the ECB, the marginal lending facility replaced the former Lombard loan in January 1999. According to Art. 18.1 of the ECB Statute, the ECB is authorized to enter into credit transactions with the affiliated credit institutions in return for “sufficient collateral”, so-called central bank- eligible collateral . Since January 2007, a uniform framework (“uniform list of collateral”) has been in place for eligible collateral, which includes marketable and non-marketable collateral. Lending limits are also used for collateral eligible for central banks, depending on liquidity categories, remaining terms and types of interest as well as fluctuation margins.
Securities lombard loan
A securities lombard loan is the short to medium-term loan granted by a bank against the pledging of marketable securities. It is used in the special form of the security disposition credit to finance the purchase of securities. The loan amount is based on the lending limit of the pledged securities. If the loan-to-value limit falls below the existing loans due to the exchange rate, the credit institutions have additional collateral rights from the GTC .
Commodity lombard credit
Merchandise for which a traditional paper is issued can be financed as part of the commodity lombard credit. To the transfer of goods to the lending bank is not required, but the transfer warrant endorsed tradition papers ( bill of lading , warehouse receipt or bill of lading ). These traditional papers certify the right to the goods, and a formally flawless transfer of the papers also means the transfer of rights of the traded goods documented therein. The commodity bombing loan is used to pre-finance the purchase or import of goods and is repaid from the resale of these goods.
Bills of exchange credit
Since the bills of exchange discount credit is no longer offered, the bills of exchange lombard credit can be used as an alternative. Business partners are according to § 19 para. 1 no. 3 a AGB Bundesbank, however, only credit institutions that can use this instrument as part of their refinancing policy. The bills of exchange must generally comply with the Bundesbank's terms and conditions of purchase for domestic bills of exchange, and up to 90% of their nominal value can be borrowed.
"Fake" Lombard loan
The “fake” Lombard loan is sometimes also mentioned in the business literature. The only difference between the "real" Lombard loan is the type of loan. The "fake" Lombard loan is therefore a current account loan secured by pledging rights and / or movable property . The “real” Lombard loan, on the other hand, is made available on a special credit account. This account-related distinction is neither legally nor operationally important and does not play a role in banking practice.
- Precious Metal Lombard Loan
- Bad debt loan
The loan conditions stipulate that the Lombard loan is granted as a fixed-term loan with terms of up to 2 years, it can be called up as a total amount or in partial amounts and is repayable in one sum on the due date. The loan amount is determined by the lending limit of the objects serving as collateral. Its intended use is limited to lending on securities. The imputed - and not market-related - interest rate for the Lombard loan depends on whether and to what extent a credit institution has to back own funds because of the pledged loan collateral . The cheapest loan interest is therefore used as a basis when pledging bank balances. The pledged items - with the exception of the commodity lombard loan - can no longer be used by the borrower / security provider due to the pledge and can only be sold with the consent of the lender .
In the securities lending , the situation is different. There it is a question of a loan in kind because the borrower, as the borrower, becomes the owner (and owner) of the securities and provides the lender with the agreed equivalent in cash (or other securities). Securities lending can represent the basic transaction for a Lombard loan from the central banks, because the borrowing bank can in turn receive central bank money when pledging eligible securities.
Derived from the Lombard loan, the verb "lombard" is the provision of pledges for the purpose of granting a Lombard loan.
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