The American banking system would be a mass of total confusion in the absence of the American Banking Association's bank numbering system. Bank numbers are vital in assuring the seamless movement of funds throughout virtually all segments of the economy. Incorrect, incomplete or omitted routing information is the culprit in costing financial institutions and consumers millions of dollars in missed payments every month. That's why it is important for most everybody to have some knowledge of what the bank numbering system is all about.
The ABA Number, or ABA Transit Number, is the number printed on a negotiable instrument (a check) drawn on a financial institution that usually appears at the uppermost right-hand corner of the check in small type as a fraction, such as in the fictional 12-34567/8901. It is a numbering system managed by the American Bankers Association to facilitate identification in interbank transactions. The numerator portion of the fraction identifies the financial institution on which the check is drawn.
The numerator is a two-part code. The first part, the "12" in the above example shows the geographic location of the financial institution. The second part of the numerator, the "34567" identifies the financial institution itself. The denominator portion of the fraction, the "8901" identifies which Federal Reserve Bank services that particular financial institution.
The numbers located on the bottom of a check is called a MICR line. MICR means Magnetic Image Character Recognition. The MICR line is made up of three sets of numbers. The first set is called the ABA Bank Routing Number or routing transit number (RTN). The second set of numbers designates the individual's account or bank number. Finally, the third grouping of numbers represents the check number.
The ABA Bank Routing Number
The ABA Bank Routing Number, or Routing Transit Number (RTN), is a nine-digit bank code. Like the ABA Transit Number, the RTN also identifies the financial institution on which the check is drawn and the Federal Bank that services that particular financial institution. There are approximately 28,000 RTNs in use today. The nine-digit code is actually a combination of the bank identifier code and the Federal Reserve Bank identifier code as shown in the above explanation of the ABA Transit Number. The first four digits of the nine digit Bank Routing Transit Number identify the Federal Reserve Bank. The last five digits of the number identify the particular financial institution.
Thus, in the above example using the ABA Transit Number, 12-34567/ 8901, it follows that the Bank Routing Transit Number will be the nine-digit number, 890134567.
The RTN was originally designed by the ABA in 1910 to facilitate the sorting, bundling, and shipment of paper checks directly back to the original check-writer's account since the Federal Reserve System did not come into existence until 1913. Since then, the RTN has evolved to accommodate the Federal Reserve System. Today, the RTN designates participants in automated clearinghouses and allows for such transactions as electronic funds transfer (EFT) and online banking.
ABA Requirements for Getting RTN
Eligibility to maintain an account at a Federal Reserve Bank is the main requirement for a financial institution in securing an ABA RTN. An ABA Routing Transit Number can only be issued to a federal- or state-chartered financial institution, which is authorised to maintain an account at a Federal Reserve Bank.