Friday, Jul 30, 2010
Gulf News
UAE regulator to insist on IBAN compliance
Dubai The UAE Central Bank is introducing the concept of International Bank Account Numbers (IBAN) for all bank customers in the UAE, bankers told Gulf News yesterday.
IBAN is a standardised numbering system developed to identify bank accounts from around the world. It was originally developed by banks in Europe to simplify transactions involving bank accounts from other countries.
“The central bank is targeting to implement IBAN across all UAE-based banks by December 15 this year. All the banks have been briefed about the plan,” said a banker who attended a central bank meeting this week.
Currently, the IBAN is primarily used only by banks in Europe, but the practice is becoming popular in other countries. Its implementation in the UAE could mean that all customers will have specific IBAN numbers in addition to their existing account numbers. The UAE will be the first country in the Gulf to introduce IBAN.
“For all transactions within the UAE, customers will continue to use their existing account numbers. The IBAN numbers are primarily used for international transactions,” said a banker.
Targeting identity errors
The UAE’s IBAN number will consist of 23 digits. While the creation of these unique numbers is expected to reduce potential identity errors in bank transfers, bankers said the target date for implementation is ambitious and could pose problems.
“Banks will have to create individual account numbers for all account holders. Although the creation of these numbers is a fairly simple process, integrating it with the existing computer systems and educating the customers on IBAN could take longer,” said a banker.
The IBAN is an international standard for identifying bank accounts across national borders in a way that would minimise the risk of propagating transcription errors.
Differing standards
Before IBAN, customers, especially individuals and small and medium businesses (SMEs), used to be confused by the differing national standards for bank account identification such as bank, branch, routing codes and account number. This often led to necessary routing information being missing from payments.
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 were therefore frequent, causing payments to be delayed and extra costs to be incurred by the sending and receiving banks.
IBAN imposes a flexible but regular format sufficient for account identification and contains validation information to avoid errors of transcription.
It contains cheque digits that can be validated in any country according to a single standard procedure. It also 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.
The IBAN should not contain spaces when transmitted electronically. However, when printed on paper, the IBAN is expressed in groups of four characters separated by a single space.
By Babu Das Augustine?Deputy Business Editor
Gulf News 2010. All rights reserved.
