The system interface is associated with the network entity (such as a specific router or switch), and not a specific interface.
The system interface is associated during the configuration of the following entities:
the termination point of service tunnels
the hops when configuring MPLS paths and LSPs
the addresses on a target router for BGP and LDP peering
The system interface, also referred to as the loopback address, is used to preserve connectivity (when routing re-convergence is possible) when an interface fails or is removed. It is also used as the router identifier. A system interface must have an IP address with a 32- bit subnet mask.