Launch of a new service that provides CUSIP and CUSIP-based ISIN numbers along with core descriptive data for syndicated loan deals and facilities has been announced by The Loan Syndications and Trading Association (LSTA), the trade association for corporate lending and loan trading, and Standard & Poor’s , operator of the CUSIP Service Bureau and a leading provider of independent research, indices and ratings.
The new syndicated loan service is the result of the LSTA’s and Standard & Poor’s collaborative efforts to design special applications to accommodate the unique features of syndicated loans.
Using the CUSIP system, the syndicated loan service establishes a common numbering system to reference syndicated loans in the corporate loan market. The use of CUSIP numbers as a unique common identifier facilitates proper crediting of money movements, creates a common reference for market pricing and enables a more orderly exchange of information in an automated environment.
“The addition of the syndicated loan asset-class to the CUSIP system will help bring about transactional efficiencies in the syndicated lending and loan trading markets and thus adds significant value to the financial markets,” says Maria Latorraca, product director for the CUSIP Service Bureau.
“We believe that our joint effort with Standard & Poor’s to implement the use of unique identifiers will create greater market efficiencies and spur the continued growth and increased volume of the syndicated loan market,” says Jane Summers, general counsel of the LSTA. “There will now be a common reference for research, pricing and other analytical tools, enabling an increase in liquidity in this rapidly growing market.”
This initial release contains about 2,000 CUSIP numbers for deals and facilities. The subscription service contains daily additions and changes to deals as released by the administrative agents. Currently, 21 administrative agents covering 80% of the corporate loan market apply for CUSIP numbers using a specialised version of the CUSIP Request online system. From its inception in 1999, the project has been guided by eight financial institutions, which also took part in a pilot test.
The eight financial institutions are: Bank of America, Bank One (now part of JPMorgan Chase), CIBC, Citigroup, Credit Suisse First Boston, Deutsche Bank, FleetBoston Financial (now part of Bank of America Securities) and JPMorgan Chase.
Since the syndication and trading of loans can often be conducted on the basis of non-public information, the assignment, maintenance and dissemination of loan CUSIPs required some adjustment from the way CUSIPs are used for securities and other public financial instruments.
To respond effectively to the increasing need for transactional efficiency required by the exponential growth in the syndicated lending and loan trading markets, the LSTA formed a committee in November of 1999 to focus on the implementation of unique identifiers for syndicated loans. Active participants in that committee have included the following institutions from time to time: Allstate Insurance Company, Bank of America, Bank One, CIBC, Citigroup, Credit Suisse First Boston, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Standard & Poor’s /CUSIP and Van Kampen Investments. The committee conducted in-depth research regarding the CUSIP numbering system and collected feedback from various participants in the loan market, including representatives from agency, settlements, loan custodians, traders, loan sales and syndications, investors and market vendors such as rating agencies and pricing services.
The CUSIP system establishes a common numbering system to reference syndicated loan credits. Presently, different identification numbers represent the same credit in proprietary systems utilised by various market participants, such as administrative agents, lenders, traders, potential buyers, regulators and various vendors to the market including pricing services and rating agencies. The use of a single CUSIP number as a unique common identifier for all market participants will facilitate proper crediting of money movements, focus inquiries, create a common reference for market pricing and enable a more orderly exchange of information in an automated environment.
A critical advantage offered by the CUSIP numbering system is that it is endorsed by ANSI (the American National Standards Institute) and by ANNA (the Association of National Numbering Agencies). The CUSIP system conforms to ANNA’s global guidelines that enable its members and the financial industry worldwide to adhere to standards and procedures for the creation, modification and deletion of unique identifiers.
Adherence to ANNA’s standards facilitates linking and cross-referencing separate local numbering systems in over 60 countries.
It is expected that the adoption of CUSIP numbers for syndicated loans will bring the following benefits:
The adoption of CUSIP numbers for syndicated loans is endorsed by members of the FFIEC (the Federal Financial Institutions Examination Council) and is expected to be used in Shared National Credit reporting.
The NAIC (National Association of Insurance Commissioners) requires regulated insurance institutions to use CUSIP numbers in making their financial reports.
The Loan Syndications and Trading Association was founded in 1995 and is the trade association for the corporate loan market, dedicated to advancing the interests of the marketplace as a whole and promoting the highest degree of confidence for investors in corporate loans. The LSTA undertakes a wide variety of activities to foster the development of policies and market practices designed to promote just and equitable marketplace principles and to encourage cooperation and coordination with firms facilitating transactions in loans and related claims.
The LSTA seeks to enhance public understanding of the corporate loan market and to serve the public interest by encouraging adherence to the highest ethical standards by all market participants. The LSTA plays a pivotal role in monitoring and bringing consensus to this fast-growing and fast-changing asset class by acting as a forum for the analysis and discussion of issues and developments relating to the loan market and advocating the shared interests of its membership. The LSTA formulates policy through its Board of Directors after consensus is developed through the active involvement of individual officers and employees of member firms.