Hypothecary securities happen debt and share. Debt hypothecary securities are bonds with hypothecary cover. Share hypothecary securities are hypothecation certificates of sharing. Hypothecary securities are controlled by the law on hypothecary securities which has been accepted in 2003. But in the law on hypothecary securities in practice some defects have emerged, therefore it has not been apprehended by the market. About yield of hypothecary securities in Russia to speak while early as the market only starts to be formed. In the west hypothecary securities are hardly less reliable, than the state securities, but yield of hypothecary securities hardly above, than state. Hypothecary securities are purchased basically by those investors for whom reliability is important. These are assurance companies, pension funds, the state.
Hypothecary securities are more profitable, than deposits at bank and investments into the state securities. For a banking system hypothecary securities allow to involve the big resources. If yield and liquidity of hypothecary securities in Russia is up to the mark hypothecary securities can become one of good financial instruments for banks, investment funds and assurance companies. As hypothecary securities are supplied by the real estate and the state warranties investments into mortgage bonds are considered as less risky, than investments into corporate bonds.
Simple words, the bank issues to the person a credit on mortgage. Then the hypothecary security for the sum of this credit is manufactured. Further this security is thrown out on the market where all interested persons can purchase it. As a result the bank receives revertively money for the sold securities and it has money for issue of new credits.