A bank code is an identification code made up of alpha or numeric characters which serves as an electronic address for a financial institution. The names and formulation of the codes can vary between countries. These codes make it possible to electronically transfer money from one institution to another.
In the United States, a bank code is a nine-digit number known as a routing transit number (RTN). The RTN is placed between colon (:) marks on the bottom left hand side of a check blank. The number which follows the RTN is the individual account number.
These designations were originally called ABA codes because they were assigned by the American Bankers Association (ABA). The ABA began assigning codes to all US banks in 1910, but that responsibility was later taken over by the Federal Reserve Banks. The first four numbers represent the Federal Reserve Bank branch for the area, the next four identifies the specific bank, and the last number tells what type of account is being used, such as a checking or savings account.
In Canada, banks use an eight-digit bank code called a Bank Transit Number (BTN). Other countries refer to a bank code as a sort code. The number of characters used by different countries varies, ranging from only four digits in Denmark to ten digits in Spain. In all cases, however, the code serves to identify the country and location of the institution where the funds are being held.
International bank code systems have been established to allow money transfers between banks from different countries. One of these is called the Bank Identifier Code (BIC). The BIC is an eight-letter designation identifying the bank, country and city, and are assigned by the Society for Worldwide Interbank Financial Telecommunications (SWIFT). Although the US has its own coding system, banks located there also have a SWIFT code which enables them to complete international money transfers.
The European Union’s committee for banking standards passed regulations requiring that, beginning in 2004, all financial institutions in member countries be assigned an additional bank code, called an International Bank Account Number (IBAN). The IBAN is an alphanumeric designation and can contain up to a maximum of 34 characters. These are governed by ISO 13616, a regulation issued by the International Organization for Standardization (ISO). The first two letters of the IBAN are the BIC country code, which are followed by a two-digit control key, the bank sort code and an account number.
In the United States, Canada and many other countries the bank code and account numbers must be printed on checks using magnetic ink and a Magnetic Ink Character Recognition (MICR) font. This type of print allows checks to be read electronically. In some regions, banks can face fines and other penalties for failure to use the proper ink and font on checks.