Art as Collateral: Art-Backed Loans, Securitization & the Law

Image Credit: Follower of Marinus van Reymerswaele, The Miser, 16th Century Oil Painting

By Dylan Cosgrove

The art trade has always operated somewhat on its own terms. Deals are often private, prices are not always disclosed, ownership may be routed through intermediaries, and provenance records vary greatly from one work to another. A 2022 U.S. Treasury study pointed to the high value and transportability of art, the market’s culture of privacy, and its use of intermediaries as reasons it can be vulnerable to financial crime.^[1] That privacy was easier to accept when art mostly sat outside mainstream finance. It is harder to ignore now that art is being used as collateral and art loans are being sold into the capital markets. What interests me about this shift is that art is still treated as something personal and culturally valuable, but it is also starting to function more like a financial asset. Two instruments show this especially well: art-backed loans and securities backed by pools of those loans.

Understanding Art-Backed Loans