Nick Goodway: Sort codes could be another headache for ring-fenced banks

Do you recognise this combination or layout of numbers? 60-20-08, 23-40-17, 50-33-12? Odds are that you don’t, but actually you use one or more of them on a near-daily basis.

They are bank sort codes, and they are the latest headache to crop up in the bewildering world of ring-fencing UK banks’ retail operations from their riskier investment banking business as ordered by the Banking Commission and due to take place from 2019.

They are unique to the UK and Ireland and were introduced during the Sixties as banks moved towards automation.

They identify the bank (e.g. NatWest) and the branch (e.g. Fleet Street) at which a particular account is held. They are not the same as the BIC (business identifier code) used far more widely across the international electronic payment world. But they are vital for ensuring that payments made to you or by you come in or out of your account and not someone else’s.

Sort codes also allow banks to settle their daily positions with the Bank of England and are key to informing the Bank how much money there is sloshing around the system and where it is.

The sort code remains at the heart of the banking system. Indeed, it has been one of the major barriers to making it as easy to switch current accounts between banks as it to switch from one mobile supplier to another.

When ring-fencing comes in, the parts of a bank within the ring-fence will not be able to have the same sort code as the parts outside. But sort codes currently apply to all customers of one branch. So the one branch — say NatWest on Fleet Street — may hold my (and thousands of other retail accounts) but also the account of a huge multinational British company.

My account will go into the ring-fence but the likes of a blue-chip FTSE 100 company’s account is most likely to end up in corporate banking, outside the ring-fence, where it has access to services like foreign exchange and treasury services.

Since I cannot have the same sort code as, say, British Airways, something has to give. My bet is that the bank will decide that BA, with its tens of thousands of transactions a day, should not be changed, while my five transactions a week should.