The 11Onze super app will allow users to open accounts in other European countries, a fast and functional operation that brings multiple benefits. Why is it important to choose which country we keep our money in?

For years, Europe has been seeking to build a common market, including euro payments. It has finally succeeded in doing so thanks to the creation of SEPA, the Single Euro Payments Area, and of the IBAN, the International Bank Account Number. These two systems make it possible for citizens to make payments, transfers and direct debits from any country in the European Union (EU), regardless of the country of origin of your current account. That’s why at 11Onze we want our community to be able to choose where they open their accounts.

Another reason why we believe it is important for our users to be able to choose the IBAN is undoubtedly related to the security of their savings. Specifically, in Spain, the Fondo de Garantía de Depósitos de Entidades de Crédito protects up to 100,000 euros per customer. But it is necessary to go further to check whether, in case of need, all customers could really recover that money.

How a country’s solvency is calculated when it comes to protecting customers’ deposits is difficult to explain. Therefore, we summarize it in one key idea: who guarantees our money is the central bank of our IBAN’s country. So, for example, if our money is in the Spanish State, the Bank of Spain must have on-hand enough cash reserves to, in case of an emergency, be able to cover all the current accounts in the country. 

In this regard, the European Central Bank collects data about European central banks’ solvency, i.e. those that offer the most protection in the event of failure of private banks. If the bank where my savings are deposited goes bankrupt, it is the central bank of that country that is liable, but nowadays, many of them are not sufficiently solvent to face such a situation. For this reason, the law obliges institutions to have supplementary insurance.

The index used by the European Central Bank for this classification, is similar to the so-called cash ratio, a formula that relates liquid reserves to deposits and is expressed as a percentage. If we look at the data in the graph below, which shows the common equity tier 1 ratio of credit institutions, Spain is well below the ranking headed by countries such as the Czech Republic, Luxembourg and Bulgaria, among others.

Seeking improvement in financial services

In addition to the existence of countries that are more solvent than Spain when opening a bank account, it is important to notice that, despite the fact that Spain is one of the countries that approved the PSD rules -in 2007; then signed the SEPA rules in 2012; and, in 2014, the agreements that initiated the use of the IBAN-, in practice, apart from failing to comply with the agreements it signs, its banking institutions have not improved the financial services they offer to customers either. For all these reasons, looking for alternatives is a good solution.

Moreover, since 2014, Spanish companies and institutions have practised what is known as IBAN discrimination, which consists of not accepting payments or direct debits to accounts that do not include the letters ES in their numbering, i.e. that do not correspond to a Spanish bank. By doing so, they contravene European regulations. This practice is not legal and only benefits traditional Spanish banks.

How to report IBAN discrimination?

Shortly after this discriminatory practice – especially widespread in Spain, but also in France – was detected, the first complaints were filed by customers. But, above all, it was the new emerging banking sector in Europe, led by neobanks and fintechs, born as an alternative to traditional banking, that led the action. Companies such as Revolut, N26, Finextra, Monito and Wise are examples of it. 

Some of these new banks, based in several European countries and, therefore, with a foreign IBAN, provide customers with tools to report it, in the first instance to the entity at fault and, if it does not rectify it, to the Bank of Spain. Ultimately, this can be escalated to European courts. Most of these lawsuits end up in favour of the people affected. The European Commission is well aware of this, as its pronouncements and reports prove, and punitive measures are being tabled. Some MEPs have even denounced it with formal questions at the European Parliament. 

Customers, new banks and European institutions are working to resolve IBAN discrimination to, once again, focus on the multiple advantages of free choice of IBAN, especially for customers. Overall, work is underway to ensure that IBAN discrimination becomes history in the near future.

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