Background
Before IBAN, differing national standards for bank account identification (i.e., bank, branch, routing codes, and account number) were confusing for some users. This often led to necessary routing information being missing from payments. Furthermore, routing information as specified by ISO 9362 does not contain check digits, so simple errors of transcription were not detectable and it was not possible for a sending bank to validate the routing information prior to submitting the payment. Routing errors caused delayed payments and incurred extra costs to the sending and receiving banks and often to intermediate routing banks as well.
In 1997, to overcome these difficulties, the International Organization for Standardization (ISO) published ISO 13616:1997. This proposal had a degree of flexibility which the European Committee for Banking Standards (ECBS) believed would make it unworkable and they produced a "slimmed down" version of the standard which, amongst other things, permitted only upper case letters and required that the IBAN for each country have a fixed length. ISO 13616:1997 was subsequently withdrawn and replaced by ISO 13626:2003. The standard was revised again in 2007 when it was split into two parts. ISO 13616-1:2007 "specifies the elements of an international bank account number (IBAN) used to facilitate the processing of data internationally in data interchange, in financial environments as well as within and between other industries" but "does not specify internal procedures, file organization techniques, storage media, languages, etc. to be used in its implementation". ISO 13616-2:2007 describes "the Registration Authority (RA) responsible for the registry of IBAN formats that are compliant with ISO 13616-1 the procedures for registering ISO 13616-compliant IBAN formats". The official IBAN registrar under ISO 13616-2:2007 is SWIFT.
IBAN imposes a flexible but regular format sufficient for account identification and contains validation information to avoid errors of transcription. It carries all the routing information needed to get a payment from one bank to another wherever it may be; it contains all the key bank account details such as Bank Identifier Codes, branch codes (known as sort codes in the UK and Ireland) and account numbers and it contains check digits which can be validated at source according to a single standard procedure. Where used, IBANs have reduced trans-national money transfer errors to under 0.1% of total payments.
Read more about this topic: International Bank Account Number
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