The Committee on Uniform Security Identification Procedures (CUSIP) system was addressed in detail at the conference, with the pilot launch of CUSIPs assigned to new bank deals scheduled to commence in the coming weeks. Eight agent banks will begin assigning the unique nine alpha-numeric characters to their bank deals in order to identify the overall credit agreement and the tranches comprising each agreement.
Dana Volfing, CUSIP committee co-chairperson and v.p. at J.P. Morgan, said CUSIPs would clear up much of the confusion involved when loans are communicated by names that are often similar. She likened CUSIPs to a Social Security number, as it will not account for any information beyond basic identifying data.
The CUSIP system initially would expedite inquiries and investigations into deals, as well as enable more precise communication between institutions. Volfing noted that CUSIPs ultimately would improve efficiency and liquidity in the marketplace, eventually facilitating system-to-system feeds among traders and agencies. The system also would facilitate funding and payment settlement among lender groups. "CUSIPs will apply to specific loan facilities and lead to middle- and back-office efficiency" addedMarcia Banks, managing director at BANK ONE.
CUSIPs can be applied for at the agent bank's discretion, although a signed lender in the deal also can apply for a CUSIP after the pilot ends. CUSIPs can be published or unlisted, making them available only to bank group members. Volfing noted that some private companies may not want to reveal their loan plans, and therefore the banks do not have to make a CUSIP public.
The pilot will be assessed in the second quarter of 2003 after the CUSIPs have been tested. Implementation is expected to proceed market-wide by the third quarter of 2003, assuming that the pilot runs successfully and the CUSIP training process is carried out efficiently. "We need to make sure protocol is set up correctly," Banks said.