Art banking and the art of investment

May 26, 2025
by Noriyuki Morimoto

Art banking is a financing method where art is the collateral: essentially high-end pawning. At the end of the day, art collection is a kind of hobby. The lack of art does not affect your livelihood, nor the continuity of your main line of business. In this respect, there may be little incentive to take pains to repay a loan backed by art, which leads to a fairly high rate of the lender taking possession of the collateral.

On the financing side, art banking has an advantage in terms and conditions, and even in the event of default, there still is the advantage of acquiring artworks at a lower price. These characteristics are intrinsic to the profitability of art banking as well as pawnbrokers.

In fact, the most common items that are pawned are highly redeemable luxury goods such as expensive watches, which are secured by extremely low collateral value, while the possibility of the pawnbroker obtaining such items cheaply is also great.

Now, for a sizable collection of art, dividing the collection due to inheritance or divorce becomes a major problem. It may often be disadvantageous to cash in the assets in the short term, and there is the question of whether it is desirable to dissipate an integrated group of artworks based on the collector’s belief, taste, or philosophy.

Time is key here. If you take time, you will probably find a buyer who agrees to buy the collection as a whole, and even when selling the individual artworks separately, you will find an opportunity to sell at a relative advantage. However, the seller, who owns the art, wants immediate payment because the due date is critical. This is exactly the situation where finance is typically needed. In such a situation, acquiring a whole collection of art as an investment and selling it over time is one possible form of the art of investment.

 

[Category /Art Investment]