'Bank account details are not valid for the country selected by you.'

I’m trying to get to the bottom of why I’m getting this error when adding my Lloyds IBAN or BIC numbers to my EU market places accounts: Bank account details are not valid for the country selected by you.

My searching on the forum suggests it needs to be an EU or Euro account - but how does Amazon decipher this from the IBAN number, and why does it matter?

I can possible create a Euro account with Lloyds and try with that IBAN account, but want to know if this is actually the issue, or something else might be at fault here causing the above error.