Foreign currency exchange rates at DoD Community Bank
ARLINGTON
, Va.
(December 1, 2007) – The foreign currency exchange rates at DoD (Department of Defense) Community Bank branches differ from rates offered by other financial institutions or published in U.S. or foreign media. These differences often result in questions to bank branch managers and confusion among the bank’s military and federal employee customers.
Officials at the Defense Finance and Accounting Service (DFAS) overseeing the bank’s operations said these differences result from computations known as the Community Bank Accommodation Rate.
The Community Bank Accommodation Rate increases the cost of foreign currency sales by 2.5 percent to defray costs associated with currency acquisition and delivery to bank customers. This is added to the currency value as purchased from in-country sources.
An important point for military members stationed overseas is that the increased costs from the Community Bank Accommodation Rate are offset in their Overseas Housing Allowance (OHA) and Cost of Living Allowance (COLA) payments. Both allowances include increases equal to the amounts they would spend using DoD Community Bank’s foreign currency sales.
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 DoD 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.
For OHA computation, the rent and utility costs of each military member living on the local economy is recorded in their military pay system in the appropriate currency. When DFAS computes their monthly payrolls, the value of this foreign currency is converted to U.S. dollars using the Community Bank Accommodation Rate.
COLA amounts result from annual surveys conducted in foreign communities to determine the value of goods and services in foreign currency amounts. The resulting computation takes in the lower foreign currency rates at DoD Community Bank to ensure members are not affected by the Community Bank Accommodation Rate’s 2.5 percent increase and can still make purchases off base.
U.S.
federal civilian employees serving overseas also receive overseas allowance, although these rates are determined by the Department of State.
DoD Community Bank branches 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.
