The International Organisation for Standardisation (ISO) has approved a standard format of Business Identifier Code (BIC) for banks and non-banking institutions, known as the SWIFT code. This code, facilities the business transactions conducted internationally via the said institutions.
SWIFT stands for ‘Society for Worldwide Interbank Financial Telecommunication’. It is also commonly known as BIC code or ISO 9362 or SWIFT ID or SWIFT-BIC. This code is often referred to as Business Entry Identifier (BEI) for non-banking institutions.
Whatever the name it is referred to as the code has one function- it is a unique alphanumeric identifier for a particular institutions branch within the SWIFTs international network.
Why is the SWIFT code necessary?
It is an essential parameter for web banking applications. The code is needed to execute transactions between two banks through their corresponding branches in the swift network. For executing a transaction through such applications the International Bank Account Number (IBAN) of the beneficiary has to be accompanied with the SWIFT code of the respective branch. Without the code, the SWIFT enabled system will not accept the transaction.
IBAN and the SWIFT code:
Both these codes are essential for international transactions through SWIFT. Their significance lies in what the two codes signify. The former identifies the individual’s bank account from where the funds are to be debited/credited and the latter identifies the branch of the respective bank account.
In some countries like the USA and New Zealand, you will only need the SWIFT code to execute the transactions, whereas, in most European countries you will require both the IBAN and SWIFT code to complete your transaction.
The introduction of the IBAN has negated the confusion caused by different variations of bank account numbers and has made execution of international transactions quicker.
In case an account does not have an IBAN code then while making payment to such an account a National Clearing Code (NCC) is mandatory. Nowadays most institutions in the SWIFT network have IBAN and SWIFT, the NCC is used mostly in countries outside Europe.
Importance of SWIFT code
The code is the backbone of international wire transfers. It guarantees accuracy and security for transactions. Also with the help of the SWIFT code backtracking the transactions is made possible.
Today, owing to the SWIFT code, business transactions across the globe can be completed within a day’s time, giving a new edge to international dealings.
An institution can register for a SWIFT code at the ‘SWIFT’ headquarters located La Hulpe, Belgium.