Press Release 0107-0001
For immediate Release
17 January 2007
Overseas military banking exchange rate offset by other benefits
ARLINGTON
, Va.
(January 17, 2007) – Questions continue to flow from military members and other customers of the Community Bank regarding the differences between the bank’s foreign exchange rates and those from banks on the local economy or published in U.S. or foreign media.
The exchange rate at the Community Bank branch, known as the Community Bank Accommodation Rate, differs because the Community Bank charges a 2.5 percent commission fee to defray the cost of currency acquisition and delivery to bank customers. To offset this out-of-pocket cost for overseas military members, Overseas Housing Allowance (OHA) and Cost of Living Allowance (COLA) are increased an equal amount by including the Accommodation Rate in computations establishing both OHA and COLA.
Community Banks are operated overseas by the Defense Finance and Accounting Service through a competitive solicitation process and award of a contract to a stateside financial institution. The current contractor is Bank of America. Banking products, services, fees and charges are determined by the military departments. All revenues received from fees and charges are used to offset the cost of the banking program. The bank contractor does not profit from nor receive any incentive from the revenues generated. Community Banks are also not in competition with local foreign banks, but are established to support the U.S. dollar economy on bases overseas and to provide stateside-like banking services to individuals and organizations.
The Community Bank Accommodation Rate is used in the computation of overseas station allowances for military personnel in the following countries: Germany, Italy, Spain, Portugal, Greece, United Kingdom, Ireland, Netherlands, Belgium, Luxembourg, Finland, France, Austria, Japan, Okinawa and Korea. The Per Diem, Travel and Transportation Allowance Committee compares the accommodation rate to the exchange rate used in the pay systems, and when the accumulated difference is five percent, the committee resets the pay system exchange rate. This ensures the pay systems rate is as close to the actual bank rate over time as possible.
OHA Computation
Each service member residing on the economy has their rent and utilities recorded in the military pay system in the local currency of the country. When DFAS computes monthly payroll, the amount of allowable rent and utilities is converted to dollars at the latest pay system exchange rate. Since the pay system rate is based on the Community Bank Accommodation Rates, the member in effect receives enough dollars to buy the local currency from the bank needed to pay rent and utilities. The net affect on the individual's pay is zero.
COLA Computation
When annual surveys are conducted for the value of goods and services in foreign locations, prices are collected in local currency and the currency exchange rate at the time is identified. That exchange rate is the Community Bank Accommodation Rate. Again, since the pay systems rates are based on accommodation rates, the members receive enough dollars in COLA to offset the lower exchange rate at the Community Bank. This formula ensures members receive enough dollars in COLA to buy the amount of local currency that represents the same level of spending documented in the latest annual surveys. In affect, the 2.5 percent accommodation fee is included in the member’s COLA entitlement.
For civilian employees stationed overseas their overseas allowances are determined by the Department of State.
