IBAN, mandatory and indispensable

From 1 February 2014, the IBAN will be the only valid identifier for making and receiving payments, both nationally and internationally. Current account numbers as we have known them until now will therefore disappear.

What is the IBAN? The code, whose official name is “International Bank Account Number” is made up of 24 characters in total, which are the 20 digits of the current account, plus another four. In the case of Spain, those four digits are the letters ES and two more numbers.

What does it do? This new system will allow all companies, individuals and other financial agents in the Single Euro Payments Area (SEPA) to make payments nationally and Europe-wide within that area, with the same rights and obligations, regardless of the country they are in, without needing to open bank accounts in the country where they wish to operate and without having to wait a few days for transfers to arrive, as they will be immediate when the measure comes into force on 1 February 2014.

For example, if you have a second home in France, you will be able to pay your water or electricity bills for the property directly from your Spanish account, without having to open or maintain one in France and without additional cost.

For companies, the trend seems to be the same. We have consulted various prestigious financial institutions and they have confirmed that the tendency will be that a company located in Germany, for example, which wishes to set up a branch, subsidiary or office in Spain, will not need to have a current account in Spain to make and receive payments, as it will be able to manage them from its account in the country of origin, thanks to the IBAN. We will have to see whether, in practice, it is as simple as they say.

As well as meaning reduced costs for bank transactions, this system will offer greater security, as for all bills that are charged to the account from February it will be necessary to have a mandate signed by the account holder, without which the bank will not pay the bill. That will not be necessary for current standing orders, which remain valid.

The SEPA area, within which the IBAN code must be used, is made up of the 28 member states of the European Union, plus Iceland, Liechtenstein, Monaco, Norway and Switzerland.

What happens if I do not know my IBAN or those of my suppliers or workers? If you do not have an IBAN, from 1 February 2014, it will not be possible to carry out any financial transactions, whether making or receiving payment, either inside or outside Spain. Therefore, if a company does not have the IBANs of its workers, it will not be able to pay their wages; if it does not know the IBANs of its suppliers, it will not be able to pay their invoices; if it does not know the IBANs of those customers that pay it by standing order, it will not be able to issue bills… and if it does not know its own, it will not be able to receive payment of its invoices.

How is it obtained? Obtaining the IBAN for an individual is easy; they only have to go to their bank and request it free of charge. In fact, if they do not have one in February 2014, the Economy Ministry has approved a temporary measure that allows banks to automatically convert current accounts to IBAN until 2016.

In the case of companies, obtaining their own IBAN is simple as well, as their bank will provide them with it free of charge until the end of January 2014. But if on 1 February 2014 they do not have the IBAN, the financial institution may charge them for converting their current account number into an IBAN, although the Economy Ministry hopes to reach an agreement with financial institutions to extend the free period. In any case, the sooner they have it, the better.

For companies, the process of obtaining the IBANs relevant to their commercial relationships (customers, suppliers, employees, etc.) will be less easy. Bear in mind that it is the obligation of the person that initiates the payment transaction to get hold of the IBAN of all the individuals or entities to which it has to make the payments. That will involve the huge task of asking, circulating, updating databases and even pursuing laggards who do not provide it straight away.

We would recommend that you begin to find out the IBANs relevant to your commercial relationships straight away, as it is a change that has an impact on every area of your company: invoicing, treasury, human resources, contracting suppliers, information technology, etc.

Do not hesitate to consult us regarding any questions that you may have; we will be delighted to advise you. 

Published by Cristina de Canals

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