Issuing Securities

Issuing of short-term securities generally has a liquidity motive, therefore their majority has a maturity of 90, 180 and 270 days. Many varieties of short-term securities are known, such as savings certificates, bills, etc. In general, they are fixed rate ones, but rarely flexible rate ones also occur. Interest payments are usually made at maturity, however, issuing on discount price is also known. Certificates of deposit bridge the gap between the short-term and long-term securities. The aim is the acquisition of sources aiming at financing permanent current assets with the emission of middle-term securities.
The purpose of issuing long-term securities is financing long-term investments. Its most widespread forms are bonds, savings certificates and letter of hypothecation.
The savings certificate can be bearer or registered, fixed or floating rate, or with bound denomination. In most cases, interest is paid at maturity, as compound interest. The savings certificate can be found in discount variations, as well. It is not possible to withdraw money from the note principal prior to the expiration.
The letter of hypothecation is fixed-rate security, of which coverage is created by lien on property. It makes possible to meet the lasting demand for credit of the agricultural and construction industries. Behind the letter of hypothecation there is therefore a land and real estate collateral, so the owner’s claim is insured not only by the repayment promise of the credit institution but also by the collateral.
The great benefit of securities emission is that if the investor needs his capital earlier than it was excepted, it is not needed to be redeemed at the issuing credit institution, but it can be sold in the secondary securities market. It can provide long-term resources for the credit institutions without having to be afraid of repayment prematurely.