|Table of Contents|
Letter of transmittal
Overseas military banking
O [COXXITTEE PRINT]
*.i MIXi V. RE PORT ON) OVERSEAS
MILITARY BANKING- FACILITIES
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l -F O TRZ CHAIRMAN OF TfE
f:iiiii ICWr*:::TEE MLTRBAK ON GENERAL
."i;iiii iii' "^ g. 831 a
W;" , OF THE
COMMITTEE ON BANKING, FINANCE
AND URBAN AFFAIRS
HOUSE OF REPRESENTATIVES
S"95th Congress, Second Session O
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.11879%. oi .
OMMT:flOrit1met-the Committee on Bauking,
Finance and Urban Affairs
The report has not been officially adopted by; th' subcommittee on
G"eral Oversight and Renegotiation and may. ndt therefore necessarily
seget the views of I s
U.S. GOVERNMENT PRINTING OFFICE
S-IS WASHINGTON: 1975
A'L . --- -.
.. . ... ....
HOUSE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS
HENRYS. REUSS, Wisconsin, Chairmam
THOMAS L. ASHLEY, Ohio J. WILLIAM STANTON, Ohio
WILLIAMS. MOO RHEAD. Pennsylvania GARRY BROWN, Michigan
FERNAND I. ST GERMAIN, Rhode Island CHALMERS P. WYLIE, Ohio
HENRY B. GONZALEZ. Texas JOHN H. ROUSSELOT, California
JOSEPH 0. MINISH, New Jersey STEWART B. McKINNEY, Connect
FRANK ANNUNZIO, Illinois GEORGE HANSEN, Idaho
JAMES M. HANLEY, Now York HENRY J. HYDE, Illinois
PARREN J. MITCHELL, Maryland RICHARD KELLY, Florida
WALTER E. FAUNTROY, CHARLES E. GRASSLEY, Iowa
District of Columbia MILLICENT FENWICK, New Jerse
STEPHEN L. NEAL, North Carolina JIM LEACH, Iowa
JERRY M. PATTERSON, California NEWTON L STEERS, IJ., Maryland
JAMES J. BLANCHARD, Michigan THOMAS B. EVANS, Ji., Delaware
CARROLL HUBBARD, JR., Kentucky BRUCE F. CAPUTO, New York
JOHNJ. LAFALCE, New York HAROLD C. HOLLENBECK, New
GLADYS NOON SPELLMAN, Maryland S. WILLIAM GREEN, New York
LES AUCOIN, Oregon
PAUL E. TSONGAS, Massachusetts
BUTLER DERRICK, South Carolina
MARK W. HANNAFO RD, California
DAVID W. EVANS, Indiana
CLIFFORD ALLEN, Tennessee
NORMAN E. D'AMO U RS, New Hampshire
STANLEY N. LUNDINE, New York
EDWARD W. PATTISON, New York
JOHN J. CAVANAUGH, Nebraska
MARY ROSE OAKAR, Ohio
JIM MATTOX. Texas
DOUG BARNAR s'ta t,.
WES WATKINaObklahofi , .
ROBERT Rcc New 'orr' ,/ '
S^' PLAWNEi- Clerk and Staff Director
^- MiEHA.T. FLAmERTY, CbQsuel
ORAS uREW TI, Cnunaeel
8 MERCER L.J frWo, Mminority Staff Director
QRA A$Lt T. Nowao% Deputy Minority Staff Director
S I.'." .
fin yxMTnE.O OW ESESAL OVERSIGHT AND RENEGOTIATION
.\ i ,ibIPSM-. MINISH, New Jersey, Chairman
DAViu W. EVANS, ft' CHARLES E. GRASSLEY, Iowa
JIM MATTOX, Texas GEORGE HANSEN, Idaho
HENRY B. GONZALEZ, Texas JOHN H. ROUSSELOT, California
FRANK ANNUNZIO, Illinois NEWTON I. STEERS, Maryland
C LIFFORD ALLEN.Tennessee
CARROLL HUBBARD, J3., Kentucky
PARREN MITCHELL, Maryland
GLADYS NOON SPELLMAN, Maryland
ROBERT LOrTUs, Stff Director
JAMES W. BaowN, Coutl
LETTER OF TRANSMITTAL
U.S. HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON GENERAL OVERSIGHT
AND RENEGOTIATION OF THE
COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS,
Washington, D.C., April 13, 1978.
Hon. HENRY S. REUSS, y
Chairmn, Committee on Banking, Finance and Urban Affairs, House oJ
SRepresentatives, Rayburn House Office Building, Washington, D.C.
DEAR MR. CHAIRMAN: Enclosed is a report entitled "Report on
Overseas Military Banking facilities" prepared by me as part of the
oversight obligation of the Subcommittee on General Oversight and
With kindest personal regards, I am
JOSEPH G. FINISH, Chairman.
OVERSEAS MILITARY BANKING
I. BACKGROUND ON OVERSEAS MILITARY BANKING
Shortly after the close of World War II, the U.S. Treasury became
involved in the establishment of an overseas banking program for
American military and dependents stationed in Germany. In 1947,
Aerican Express and Chase Manhattan were authorized by Treasury,
after a request by DOD, to open banking facilities in Frankfurt,
Germany. When the occupation troops remained in Germany, the
facilities spread throughout the country and to other American bases
in Europe. To this day, Chase and Amexco are the only American
banks operating military banking facilities in Europe.
During the early 1950's the military banking program expanded to
Japan and Okinawa with the Bank of America, and First National
City Bank (now Citibank) joining the two original operators.
SToday the military banking program includes 142 full and part-time
military banking facilities in Europe, all but three of which are operated
bjy American Express. In the Pacific, 41 facilities are in existence.
There are no Unit&d States bank-operated MBF's in Spain or
Italy. Italian and Spanish banks, supplemented by the military
finance offices, provide banking services to American personnel in
Until recently, the military banking facilities operated under the
joint jurisdiction of the Defense and Treasury Departments with
Treasury's primary responsibility lying in the area of banking policy
and practice and DOD's in the area of logistical support. Treasury's
role clearly was predominant. It approved or disapproved requests for
MBF's, selected the banks to operate the facilities, published policies
and procedures for their operation, and determined the charges or fees
for the services provided.
In addition, until the present fiscal year, it was the Treasury which
reimbursed the banks for operating losses in the form of Treasury
deposits placed with the banks in amounts sufficient to generate the
earnings needed to offset their losses. While an exact figure is difficult
to determine, it is estimated that this subsidy may have amounted
to $10 million in recent years. Additional undetermined costs were
incurred by the Department of Defense for logistic support provided
free to the banks.
Presently, the MBF's operate completely under contract with the
Defense Department and financial support is provided directly through
the Congressional appropriation process. For fiscal 1978, the Congress
has provided $12.1 million for the overseas military banking program.
U. BACKGROUND ON SuacomnMr E WORK
As a result of numerous complaints from servicemen and their
dependents regarding alleged poor service provided by the military
banking facilities, Chairman Henry Reuss of the House Banking Com-
mittee in 1975 asked Chairman Minish of the Banking Oversight
Subcommittee to look into various problems involving the MBF's.
The Congressional Research Service of the Library of Congress
reported that, until 1975, "to the best of our knowledge, no Con-
gressional investigations of U.S. Branch Banks' operating on U.S.
military bases overseas have ever taken place, nor oversight main-
tained. We know of no Congressional hearings and/or reports on the
The Subcommittee's investigation, which extended into 1976,
focused primarily with the level and type of service provided by the
MBF's. The Subcommittee also worked with the General Accounting
Office which studied the military banking program with primary
emphasis on the management and financing of the program.
The Subcommittee's investigation in 1975-76 largely confirmed that
serious problems, affecting servicemen's morale, surrounded the oper-
ation of the MBF's. Long lines for service, inadequate space, poor
exchange rates on foreign currency, high check cashing and other fe
delay in the receipt of bank statements, failure to post deposits in a
timely fashion, inequities in the pay of employees at the facilities, and
discourteouss service were among the major problems verified by the
It was concluded that much of the blame for the difficulties should.
be attributed to the Treasury Department. Contrary to the Treasury's
assertion, it was apparent that the banking facilities did not measure
up to Stateside facilities.
We found both the military and the bank facilities attempting to
work in concert for the good of the American servicemen. Needed
reforms and changes were in large part supported by the American.
Express Company, Chase Manhattan, the Army and Air Force, and
most importantly, by the soldiers, airmen, and their dependents who
use the facilities.
These recommended changes, however, have been ignored, rebuffed,
and resisted by the Treasury Department. While some progress had
been made, it was noted that these improvements had occurred after,
and in all probability were generated by its decision to investigate'
this entire area.
We made the following recommendations regarding the overseas
military banking program:
(1) There must be improved communications between the Treasury1
Department and both the banking facilities and appropriate military
(2) The banking facilities should strive to improve their image By
providing more information to customers with regard to all aspects'
of their operation and by giving the highest priority to customer,
(3) Eliminate the 25 cent per hundred check cashing fee for account
holders and raise the present maximum amount which may be cashed
to a more realistic level.
(4) Permit military finance officers to cash the checks of servicemen
at all times.
(5) Institute an instant line of credit of $100 for account holders.
at the military banking facilities.
fr !'* *: '" J *: . "
a )! Redaising th: numerous competing demands for DOD funds,
td b abwmmtte. wvertheles. recommended that the Department
should strive to provide more adequate space for the military bamkmig
7), American dependents employed at the facilities should receive
at y IifM' benefits' with foreigdi nationals doing the same work.
*'-- Jbabaiik managers should be -iven greater authority and
t tj it ri a d t6"the everyday opdfttions of the facility,
'l difionfe Subcommittie made the following assertion in its
'z -.'." ***, .* ".- .
'& should 'b ndted that the investigation dnd the above reebm-
iettH&tioigs werb M de within 'the existmg, institutional structure of
ityr batkine. If inptovemines ate iot forthcoming in their entire
a3'tt"i donsidega tio"voud gento establishing a new institu-
1A*Ji$M1IaI streture." uI.
tYh this ecnxiectlon, the'Gefieral Accoiinting Office made the Tollow-
ihg recommendations 'in' its teport bf December 12, 1975 entitled
"Overseas Military Banking: How it is financed and Managed."
9T Congress should Ibiidertrensferting the responsibility of both
prbgrmN ftmding and management frdm Treasury to Defense. This
would place program costa with the agency primarily deriving the
benefit. And, it would promote efficiency by compelling installation
commanders ,to:be held principally accountable for holding costs of
toh4services provided -by the banks as low as possible.
addition, congress should require the administering agency to
anannmual appropriation request covering anticipated expenses.
KPrawm costs tpep .would be identifiable, and would assure that
o 4iLq"n of the program mpits with legislative approval."
jit. 'RESPONSE BY JOINT TAsK rORCE ON OVERSEAS MILITARY
W kresltf of, tile 'iAO &nd Subcommittee investigations d Treas-
uiy)OD Joint; Task. Force ;n Ovnrseas Military Bunking was
established. On May 28, 1976, the Task Force responded as follows to
Chairman Minish's recommendations:
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4()) j nps'ev'PEd communiQatioa should be established between the
kaaadp .opartaeat and boththe banking facilities and appropriate
ta a ar w, ", t "
#The task tuh.es ise coamatnimatidn at the depart-
mentl Jevel was adequate, there is a need for improvement in com-
audid 666 A i flftea .te o the opderatmig levM of both the banks-
a~dW^ iel liad~'arepsoftlhe' Snrvices. Partial accomplishment
of this objective has already resulted from the efforts of the task force
in conducting this study. Standard procedures for bank operations
qFl "pW.btOwbfo distrabut._ to all Prs oen-
eeWurthr ais PqnTcion n te various levels of
(2) "The banking facilities should strive to improve their image
by providing more information to customers with regard to all aspects
of their operation and by giving the highest priority to customer
Task force comment
Field visits made by members of the task force indicate that the
banks are making this effort. A similar effort on the part of local
commanders is also underway, and this two-pronged approach has
already had favorable results, as evidenced by the reduced number of
complaints now being received from bank customers. Appointment
of bank liaison officers at the local level provides a channel to the
customer that has an added degree of credibility as well as a broader
customer contact. Local bank managers generally showed genuine
concern over the image projected by their facilities and were active
in facilitating their customer relations. The "single-line" concept
of teller service, which is now employed by many MBF's, is one
example of the banks' efforts to improve service.
(3) "Eliminate the 25 cents per hundred check cashing fee now in
effect for account holders and raise the present maximum amount
which may be cashed to a more realistic level."
Task force comment
Treasury has eliminated the 25 cents per hundred check cashing
fee for account holders provided the amount of the check does not
exceed the account balance. The option of depositing such checks
for collection when the amount exceeds the customer's balance remains
in effect. A schedule of proposed check cashing fees is discussed in
Chapter IV. The task force considers the $300 maximum for cashing
stateside ckecks to be a realistic limitation considering the statutory
restrictions on offsetting uncollectable items from an individual's pay.
(4) "Permit military finance officers to cash the checks of service-
men at all times in order to reduce the burden on military banking
Task force comment
Treasury has authorized such action when justified at individual
installations on the basis of long lines and unreasonable delays in
providing service at MBFs. DOD has not yet delegated such authority
to the Military Departments. The task force concurs that the authority
should be delegated for use when justified; however, constraints
on cashing stateside checks are discussed in Chapter IV.
(5) "Institute an instant line of credit of $100 for account holders
at the military banking facilities in order to avoid the present problem
Task force comment
The task force is opposed to a blanket extension of credit to all
account holders in any amount. Such an action would undoubtedly
encourage some account holders to extend themselves beyond their
financial means. The task force does, however, recognize value in an
instatft line of credit which could" be made available by the bank to
account holdeii who apply and qualify under the 'same ctiterit cur-
rently used to make standard types of -loans. Such a procedure has
met Wth 7aryingdWegrees of success in stateside banking operations.
(6)' "1Cealizing the numerous competing demands for DOD Ifunds,
Mr. Mixi i nevertheless believes the Department should -striye to
provide more adequate space for the military bafiking fa-ilities."
Task j..c. comment. .
The task force concurs in this observation and recognizes that,
resulting from. Mr. Minish's report, field commanders have increased
their effortss to improve facilities.= An indication of departmental
interest nd support of such efforts would undoubtedly encourage
such efforts by subordinate commands, particularly if. some assurance
were .6 be givetnun thatimproveent rejects for banking- facilities
would lhot be prime candidates for budget reductions. at the depart-
mental levels. .--
.. . .. .. .. ,
(7) "American depef6dents euiployed at the fadilitie, should receive
equal itp nd benefits with foreign nationals doing the same work."
T40orce comment ."
Thb Minish recommendation :somewl at .smplistic in naipre in
that "equal pay for equal work" involves complex and emotion-laden
factors which differ depending on local customs throughout the world.
The task force accepts the principle expressed in the recommendation
butrecogqiies .that there are: varying interpretations of :"equal pay".
itvlseo recogniaes that an unequivocal application of such a.policy
wfIrldwide would work to the. detriment of American dependents .in
areas where they are now paid more than local-national employees
Quality, tecognizitg length of service. and seniority, is desirable in
such aeas as leave, sick leave, and similar fringe benefits. Equality in
net income, or take-home pay, is .also desirable if, again, allowance is
aad for length of service and seniority as dictated by local custom
and accepted personnel management practice. Any move.to increase
grm, salaries paid to American dependents which at. the same time
might subject those members of the American -forces to local laws- and
local taxes may not serve a useful purpose. :-
'.,.- .' ,.- .- .' '*: -. .- : ,
". "'Tal bank ma nagers should be given greater authority and
fljdxbiity ith resd to the everyday operations of'the. facility."
r .Yj orce co n t: ; :. .. ".. .. . .-
The task force concurs in the principle of tis recommendation but
was unable to identify specific changes which might be made to
authority presently available to facility mangers in conducting day-to-
day operations. This precept should be given full consideration in the
development of standard procedures for MBF operations with the
objective of strengthening management at the operating level.
Finally, with regard to GAO's recommendation that the program
be transferred completely to DOD and be funded by an appropriation,
the task force stated:
"Subject to Congressional approval, DOD should bear the
costs of operating the overseas military banking program
and should seek an appropriation for this purpose in the
fiscal year 1978 operating budget.
Use of compensating balances should be retained as an
optional method of providing initial reimbursement to
participating banks. Reimbursement by Defense to Treasury
for the imputed value of funds invested in compensating
balances used to finance the program is preferred to the
alternative of direct reimbursement to the banks, although
it is recognized that circumstances may dictate use of direct
Agreements with participating financial institutions should
be revised and expanded to more clearly define relationships
and responsibilities. Three of the five voting members of the
task force concluded that:
Responsibility for administrative management of the
overseas military banking program should remain with the
Department of the Treasury.
DOD should assume a more active role in certain policy
decisions affecting operations of the program.
The remaining two members concluded that management
of the overseas military banking program should be trans-
ferred to DOD in a responsible manner at a date mutually
agreed upon by the two departments."
IV. DOD ADMINISTRATION
In September of 1976, the Office of Management and Budget gave
its support to a Treasury Department request that the Defense
Department take over both the management and funding of the
overseas military banking program.
A memorandum of understanding between the two departments was
signed on October 21, 1976, and the transfer of responsibilities was
completed on April 1, 1977. Treasury continued, through the com-
pensating balance method, to fund fiscal year 1977 program coats.
.The fiscal year 1978 Defense budget, approved by the Congress and
signed by the President, contains $12 million to finance the program.
In.September 1977, contracts for the operating of the facilities were
entered into by DOD and the banks in accordance with Armed
Services Procurement Regulations.
With appropriations provided directly for the MBFs for the first
time, Chairman George Mahon of the House Appropriations Com-
mittee wrote the following letter to Chairman Henry Reuss of the
House Committee on Banking, Finance and Urban Affairs:
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ionorable Henry S. Reuss
Cooittee on Banking, Finance
and Urban Affairs
2129 BRayburn Building
Washington, D. C.
Dear rx. Reuss:
During the past tvo years plens have been =at to -switch te@ facial
support provided to overseas military ban king facilities frk Inirect
subsidies provided by the Treasury Department to direct funiang bo tihe
Department of Defense. Your Committee and the General Accounting Ofiea
wire instrumental in ma;4ig these changes and directing ch gzss- i the
afsni sratipn of the P .rogra.
.. ... . .. 4 -
TBn funding plcy wifl go -into effectt -cn frtober 1, 1978. Mmas
b are been inelndeR itn i. PT 29T8 befftse :*irqprtiet~ Mbil to finesse the
costs of 1the ulitary dversees l ,a, i .g-sbt.- t. The: Appraopriatios Cofctte
believes that there say be opportunities to reduce the operating losses
vlieb these banks incur end thereby reduce the subsidy which is proridea,
wiithent rteucid the beAlin services provided to oar overseas nilflany
personnel. In fact, the*r e reasmeff to believe that the services could be
iprwed, espeeiafly the operations debh result in the loss of ey a -
hos testingg in liste to ndke 'a btlng transaction at these Sectltines.
Tn viewv of t-is situation,, vw uaould anprectiate yana" CarmitLt- end co tfent
a further inquiry into this program, including a review of DOS p;a--s to
assuae responsibility .ir financing,: sapslrision and audit of these bawks.
Replies to Chainr.an Mahon fran Chairnnn Reu-ss and Minish -vre as follows:
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JAMES J. BL.CHAUIO. r-cM.
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JOHN J CAVANAL.GH. kiL.,
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JIM MATI70X. TEE.
SAuCc F. V0.1". 6.IM.
IOUG ,A.AN ID. GCk.
WC, WATWEI. OKLA.
U.S. HOUSE OF REPRESENTATIVES
COMMITTEE ON RANKING. nFI.-NANC AND URBAN AFFAIRS
2129 RAYBUAN HOUSE OnoIC BUILDING
WASHINGTON, D.C. 20515
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August 10, 1977
Honorable George H. Mahon
Committee on Appropriations
U.S. House of'Representatives
H-218, The Capitol
Washington, D.C. 20515
Dear Mr. Chairman:
Thank you for your letter of August 8, 1977, indicating
the new procedure which will be used to subsidize, if needed,
overseas military banking activities. I think your direct
approach will certainly lead to efficiencies which are not
I am taking the liberty of sending a copy of your letter
and my response to the Honorable Joseph G. Finish, Chairman of
the Subco:ri-i ttee on General Oversight and Renegotiation, whom,
as you know, has been responsible primarily for the activities
in this area. I am requesting that he comply with your request
to review the DOD plans in this instance.
1ery S. euss
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U.S HOUSE OF REPRESENTATIVES
SUuJOMMIrTCI ON GENERAL OVERSIGHT
* CAM IBTEON WAKINON.D.. 0NCfSANDBAN AFFAS.
WASHINGTON. D.C. 20513
August 23., 1917
I,. ._. ale George K.-ahon
rTae ttee o. Appropriations
I-' Y,-. hust epresmntatlve- -.
"H-2I18, The Capitol
-Iashington. D.C. 20515
Dear Mr. chairman: .
"#"i ;iT:, ,"1 : " ""* " '"'"', ";, "" ".o.'>."" .." ., : ":';
C,,. :. ,C Airq Remuss has forwarded.your letter on military banking .
< W y nttestob my attention. As you may be ware, my Subcommittee has
Seen conducting continuing oversight with regard to this program and "
Issued a report with recommendations for improvements in early 1976&. .
Is....e. At iew of the-n!im fund im- poli, which wi 11 go into-'effect,.f ,
h" lim'tarj banking sacil-iiis oi Octo'ber IL 1977, 1 certainly agree with,
ff" jr'i viewan the needi 6&nt&wt a further inqutry into this programm." '
*.r *a sff asi working and wilt .V-stinue its efforts, to Insure that
., Nerican servicemen and thgir dependents are receiving the best possible
Banking setfHces at the lowest possible cost to the American taxpayer.
lr,. *' r. *n .. .: : .
Be:: .' -. Ie k ssuSed that -..Su.bcapittee. wi11 continue to review this:o- ".
. gramannd we will bemost pTeased to share bur findings andrecommendetims .
In this area with you and your distinguished Committee. .
With kindest personal regards I am,
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V. SUBCOMMITTEE SURVEY
In late 1976, the Subcommittee wrote to every American ilitry
base serviced by an MBF in an attempt to ascertain the current let1
and type of service being provided. Replies, which were received by
early 1977, represented about 80 MBF's, or about half the total.
In addition, in July 1977 the Subcommittee requested and received
from the Defense Department a report entitled "Present Status of
Overseas Military Banking Program."
Although the survey and the DOD report were conducted at slightly
different times, the obvious contradiction between the two iwas a
cause for concern.
Following is a summary of the Defense Department's report'on its
progress in dealing with each Subcommittee recommendation and a
comparison of it with the Subcommittee's independent survey of
Subcommittee's recommendation No. 1
There should be improved communication between the Treasury
Department and both the banking facilities and appropriate military
DOD agrees with the Subcommittee that improved communications
is needed between headquarters and thee banking facilities. They con-
tend that new emplasis has been placed on communications and that
DOD personnel have visited field commands and banking facilities
and intend to recommend more visits. Closer relationships between
field commands and banking Liaison officers and facilities are being
Subcommittee's independent survey
The Subcommittee's information received from banking facilities
throughout the world did not support the Department of Defense's
contention that improved communications have or are being imple-
mented with the banking facilities. For example: Holy Loch, Scotland
reported that they never received information on services the MBF
was to offer or the charges that were to be assessed. They discovered
on their own that the MBF was charging an incorrect exchange rate
on foreign currency. In Neo Maki, Greece, the banking facility
reported that Washington did not respond to its inquiry on a problem
of erroneous service charges. The banking facility in Morocco reported
that it has virtually no contact with the Treasury in Washington. The
facility at Karlsruhe, Germany argued strongly for the establishment
of a manual of operating procedures and services. In Grafenwohr,
Germany, the MBF reported a lack of timely responsiveness on the
part of the Treasury and Defense Department to the needs of the
community. In New Amsterdam, Netherlands, the banking facility
reported that communications between the Treasury Department and
the MBF were a definite problem. The facility at Zwibrucken, Ger-
many cited a need for improved communications between the Treasury
Department and both banking facilities and appropriate militanY
The facility am GiaS4 reported poor communications with
Wti.rbi Xol~ota, Japa- there was a .call for lkarer polgc'is
Si~cowivtee's recoww~ndation No. 2.
- .The bankig facilities should. strive to improve their image by
providing more information to customers with regard to all aspects
of their operation and by giving the highest, priority to. customer
w 1 e, .. .. .. * : ; ..; *. :
*1 .. :- .
,Denere. reports that 'the bawkihg facilties are making the effort
toiaImpnve their image and leSQ4of customer service. They claim that
tier: efforts "already have had favorabl. results as evidenced by the
reduced number of complaints now being received from bank cus-
tomers." Local bank managers are showing genuine concern. about
$Ite ,nwge projected by their facilities. .
Subcommittee's independent survey
Responses to the Subcommittee's inquiry revealed that the level of
"aeqce ,ui tb M F had J.proved somewhat from the time op the
mbcmittee's m4 iayetilgatmin, but that problems remained,
tqnip Bu%1r, QUiawz.'tepoit~cilong lines and delays in dbt' '
service, particdarly ^on- pay day. SAbu -in Xkou, TalwajI reputed
delays in posting of deposits' arid delivery of monthly statements.
Another facility m Okinawa reported that "Long lines ae a nmjor
.Usi' GuOam.ported thaservice is bIlow average. Zw., briken,
foaany. cited aLieedfdr un.iproved communications bebvween banks
"md cUtWmtxis aid Spadahdem, .Germany reportemka similar need
r b ett customer' aaamiction. Fidla, Garm any reported
thit th e, military banking ffciI 'ty at that: ioeaion is Eo.t customer
kbB*fed. Schweidikutt, -Germany reported dissatisfeation, witW tit
*mouMA t, timei eed-4.r b.anasactions and. .diacmoteovs -,empoyjeest
ai&uwaehwlt, .Gzcnaiinytreporte&L that -l g lin6s- and doela3- Sft- a
problem. Nurenberg also contended that service is oxtnuaely, slow
and there is a lack of concern among einloyees and management.
zingen Germany reported many cepans regarding 'e i'late
ticoit bank stdtemeits..Bid l oeez, Gehn t6ytepor td tha4i' ht6gre
is no provision at the banking facility for bindtvid sls' tb dIscus
banking problems privately with bank personnel. Baimenhatsei
Qpraaay re.poe trt-ed Jt e e i, e. is g to tall... w uaptable. with
wxnsswaiting .up tq .. nijaut.t iWti. l .ne.f vAree A.-gabrg,
Geg~a1y reppFted *ate cu~nw^iai^pqfienoe. ^wpbk' delays BLu tAK
mceipt a .ba aktsui. tw ei.. : .,;,,. ., ..,,-. r .I. .. ,.)
f..Awhtffajurg C~n~y rewwMr^-bat sear~iwi t~o~thepeufiwner~ais
still unsatisfactory. Baumholder, Germany reported that long -9V
still exist in the MBF at all times and that the MBF still has a very
bad reputation with members of the cd itimuniy a twio
to. a.e .... ....... r l t rat
toldf andm ealisti .p ,.nmmtta ba .ca.hed
to a more realistic rate."
DOD d(id eliminate the 25 cents per 100 check cashing fee for account
holders at military banking facilities. In addition, an account holder
may cash a check up to the amount which he has on deposit. The
$300 maximum still applies to non-account holders. DOD also has
stated that the present service charges and fees will be reviewed
again during fiscal 1978. .
Subcommittee's independent survey
Only a small number of the military banking responses dealt
with the check cashing fees. Berlin, Germany recommended elimina-
ting all fees. New Amsterdam, Netherlands commented that the
$300 maximum for non-account holders is too limiting and that
account holders should be able to cash checks over the amount in
Subcommittee's recommendation No. 4 .
Permit military finance officers to cash the checks of servicemen at
DOD report .
Check cashing by finance offices co-located with banking facilities
has been authorized on payday and the day after at 35 overseas
locations at which long lines at the banking facilities were causing
unreasonable delays for bank customers.
Subcommittee's independent survey
Most MBFs did not report this item as a major concern in the
Subcommittee survey; however, a few facilities did raise the issue.
For example: Karlsruhe, Germany stated that "the elimination of
check cashing by the disbursing officers appears to be an attempt to
force the service member and DOD personnel to use the MBF.'.
Yokosuka, Japan reports that the disbursing officer is not permitted
to cash checks. Apparently these are facilities which had not yet
received the necessary permission from Washington to cash checks
at finance offices. -
Subcommittee's recommendation No. 5
Institute an instant line of credit of $100 for account holders at
the military banking facilities.
This recommendation has not been implemented because of the
possibility that younger and less experienced account holders would
e encouraged to extend themselves beyond their financial means.
However, consideration is being given to the approval of a line of
credit program for qualified customers to be put into operation in
fiscal year 1978.
Subcommittee independent survey
Since the Subcommittee initially made the recommendation
regarding instant line of credit in 1975, it was a little astounding to
discover that DOD is "considering implementing it some time in
fiscal year 1978". The Subcommittee inquiry of bases found that of
the MBFs that commented on this issue, 12 were in favor and 6
were opposed. This result may have had an effect at DOD where
there his apparently been a change of heart from the original steadfast
opposition to this recommendation.
S&&comittaee-' recommendation No. 6
eldinmi the numerous competing demands for DOD funds, the
SbbomtnittAe nevertheless believes the Department should strive to
provide more adequate space for the military banking facilities.
IDebse, comments that they are endeavoring to remedy inade-
qupaim the space provided to military banking facilities. DOD, in
ft, has issued new guidelines for banking facility space that increases
the maximum space permitted.
Responses to the Subcommittee inquiry indicated that little
progress had: been made thus far on this issue. Keflavik, Iceland
reported "inadequate space." Heilbronn, Germany reported that an
effrt is needed to expand the space available. Moehrmnger, Germany
reported that "their MBF suffers greatly from a lack of adequate
space. The current facility is woefully inadequate." Pirmasens,
G( nany reported an inadequately cramped facility. The facility
located at Stuttgart, Germany reported a need for more space for
cnfidential customer counseling and a general lack of adequate
physical space. Both Chicksands and Lakenheath in England stated
that a major problem is a lack of space in the present facility.
S* hwommi tees recommendation No. 7
American dependents employed at the facilities should receive'
equal pay and benefits with foreign nationals doing the same work.
DOD comments that this is not a problem "with the exception of
American dependents in Germany, Japan and Okinawa." (DOD does
mnot point out, however, that these three communities account for
75.4 percent of all banking facilities in the world). DOD states
further that the situation in Germany "is now being explored" and
that "consideration will be given to the adequacy of pay and benefits
fqr American dependents in relation to the pay and benefits for local
n atioals at the same level of responsibility and seniority."
ommiftie dependent wvey
This item wan not a concern of most $BFs responding to the survey.
Te Milltar Banking Faility at Ansbacl, Germany reported
lowerver that inM their opinion; American dependents employed at
MBFs should be jaid. equally with ,foreign Nationals doing the same
wk. The facility at Uppe Heyford also expressed the belief that
tepay rates of Americas shoulu4 not be disclosed due to the fact that
t are higher than those of.t nationals in England and might aggra-
vae the disgruntled feel on. the par of the English.
Subcommittee's 'recomM enda&ion No.8 :
Local bank managers should be given greater authority and flex
ibility with regard to the everyday operations of the facility. :
DOD response ,
Despite the fact that Treasury had agreed with this recommenda-
tion during the 1076 hearings, DOD reported that they "have not
given any new delegation of authority to local managers." ,
Subcommittee independent survey
The Subcommittee survey disclosed that th,.re has indeed, been little
activity to implement this recommendation, For example: Holy.Loch,
Scotland reported that more flexibility is needed to meet local condi-
tions. They were denied permission to open 30 hours per week .as
needed. High Wycombe, England expressed a desire for longer banking
hours. Babenhausen, Germany reported that a request for full-time
banking services has been in for over a year. Giessen, Germany
reported that a persistent source of dissatisfaction is the bank operating:
schedule and that Saturday openings would make it possible for'
soldiers to make one stop to do all their banking and shopping and
would simultaneously reduce the amount of lost duty time during the
week. Karlsruhe, Germany reported that the attempt to establish
Saturday working hours has been thwarted. This facility also says
that the lack of freedom to make local decisions continues to result in
projecting an image of an inefficient and bureaucratic banking system.
Nueremberg, Germany reported that expanded banking hours are
clearly needed. Stuttgart, Germany reported that the MBF still
operates at 25 hours per week despite the hearing record of the Sub-
committee on General Oversight which indicated that facilities in
Europe would be permitted to expand thfe hours of operation to '30.
per week. Ulm, Germany expressed the opinion that bank managers
should be permitted to set the operating house for their own facility.'
Fulda, Germany reports that their request to expand to a 30-hour
week has been disapproved and the 25-hour continues to be inadequate.
New Amsterdam, Netherlands and Ramstein, Germany both call for
greater authority for local bank managers to meet local conditions.
VII. OVERSEAS INVESTIGATION
As a result of Chairman Mahon's letter, the contradictions between
DOD's report and those from the field,, and in order to conduct
thorough oversight investigation, it was determined to undertake a
field trip to military banking facilities in November, 1977. The fact
that DOD had just taken complete control of the program, including
funding, also made this an ideal time for such an inquiry.
A list of the bases visited during the investigation follows. A number'
of factors went into the selection of bases visited. We desired a mix of
size, branch of service, and type of personnel. In addition, the location
oT problems as indicated by the survey was considered, and was the
accessibility of the bases in the short period of time available for
f., '. IAMERICANMILITARY BASES VISITED
,Jinttwates I and Woodbridge. England; ,Holy Loch, Scotland;
Siti erg,: Kaisenslautern, Zwiebrucken, Munich, Augsburg and
Pirminsen, West Germany; Aviane and Vicenza, Italy; and Torrejon,
,-A each locatioxi, the banking facility was observed, its officers,
emplbyes, andicustomers questioned; and-discussions were held with
milwttry banking and finance officers. In -addition, meetings were
conducted with Fhe leading military and civilian personnel in Europe
with responsibility in the military banking program.
NW* iportaptfly, at" each base the investigation included inter-
views &V random, with service personnel and dependents both inside
mid i.taide the banking facility itself. Approximately 50 such inter-
viet were conducted during the investigation.
,. ,. r VIL hITaLT AND SPAIN
"I0: both It!ty and Spain, American banks are not permitted to
*Temte militsrv banking facilities and American military installations
utilize the service of Italihn and Spanish banks.
Stin Ltaly, 61 Italian banks operate four full-time and 6 part-time
MAkingfacpiities at U.S. Bases. In Spain, two Spanish banks provide
iMe-qprvioe at the two major U.S. bases.
1' p und that tke level and type of services offered by these banks
varies greatly from facility to facility. For example, the Banca Popolare
dL4orde*B at Aviano Air Force Base provides nearly a full range of
wwvo and operates with efficiency and effectiveness exceeding or
o4wa to qay American operated banks we, examined in other European
pm.wanuds:.Other banks, those atVicenza and Torrejon, for example,
providee oily minimal services-not much beyond check cashing and
low interest savings accounts. Overall, the level of service is below
average but the facilities do, provide essential services not readily
available elsewhere, services which are vital to the morale and per-
fenrmance of American miitTary personne .
; ik Italian and Spaaish banks receive no direct reimbursement and
aneae iu beens provided for by the appropriation proQesa. However,
d*ak of the four full-time military banking facilities inItaly maintains
aTiemasury General Account which amounts to over $200,000 per bank.
AIn Spain, a Fieance Officer's Account, totalling about $1 million is
kehqpt at the Spanish bank at Torrejon. ,
The Treasury asserts that these accounts are not for the purpose of
awbaidihng the services provided to Americans. However, the banks
e .trgard "mthe accouMnts as essential payments for these
services, and in practical terms it .is clear that the fumds do ..indeed
stitu.te an indirect payment to the banks for servicing Atdnerican
military personnel and.their dependents. "'.
SI'Tftreammuy-Deprtment, as part of its overall disengagement from
military: baking, has indicated that tbe accounts will be phased out
aMd tnay be headed completely by fiscal 1979. We regsad this as a
jttIstially ri- elma.d harmful action. The banks, in all probabil-
ity, will cut or end their :services to Americans if: Treasury withdraws
its money and the authorization for the deposit in Spain. The Depart-
ment of Defense has no mechanism at present to substitute for Treas-
It is incumbent upon the two Departments to work out a system to
assure continuation of banking services to Americans service personnel
and dependents in Italy and Spain. For example, Defense might
eventually reimburse Treasury for interest lost in the military banking
accounts in these countries and direct appropriation might be used to
cover DOD's cost. As an even longer range solution, perhaps American
facilities, given a change in law and attitude by the Italian and Spanish
governments, could be brought into these nations under contract.
In any event, Treasury's desire to end the accounts in a hasty
manner will benefit no one and we strongly recommend that this policy
not be implemented.
At present, the U.S. Treasury Attach6 at the American Embassy in
Rome, is responsible for overseeing the relationships and arrangements
between the Italian banks and the American military. In addition, the
Attache serves as a contact point to assist U.S. military authorities
with the Bank of Italy in connection with collateral deposits and with
the Italian Exchange Office to assure compliance with Italy's exchange
Since the overall responsibility for military banking services is
being transferred to DOD, the Treasury Department wishes to be
relieved of the role it currently plays in Rome.
However, there is no appropriate DOD office in Rome to assume
this responsibility and we feel it is essential to have some Rome
contact point to deal with the Bank of Italy, the Exchange Office,
and at least the Rome-based banks which provide military banking
Therefore, as with the deposits maintained in the Italian and Spanish
banks providing banking services to the bases, we feel the Treasury
should avoid precipitate action on this issue. The Treasury Department
Attache in Rome should continue his lead role in military banking
unless and until a more suitable system can be developed.
CONCLUSIONS AND RECOMMENDATIONS
We believe the military banking program is vital to the morale.
and welfare of American servicemen and dependents stationed abroad
Unfortunately, the program has not been well administered in the
past and the banking facilities have suffered greatly from well-earned
image problems reflecting an inadequate level and type of service.
We have found that, generally speaking, the overseas military
banking program is in better shape at the present time than it was
when the Subcommittee first investigated this area in 1975.
Crucial to the improvements which have occurred and to the pro-
gram's high hopes for the future is the centralization of administra-
tion in the Department of Defense.
Both in our field investigation and in discussions with appropriate
DOD officials in Washington, we have found a new spirit of dedication
to improve the services provided by the military banking program.
Now that the program is completely under the authority of the De-
partment whose personnel it services, there is a determination,
especially evident at the bases and banks, to make the program work
and to improve its image. a
The contracts signed by DOD and the banks reflect both this new
commitment and an awareness of the concerns voiced by this Sub-
committee in the past. In the "Objectives" section of the contract,
the following goals for fiscal 1978 are specified:
(1) Reducing the period of time in posting to client accounts for
both checking and savings accounts.
(2) Reducing the period of time in rendering account holders
statements for both checking (monthly) and savings (quarterly).
(3) Reducing the delays of waiting in lines at the MBFs.
S(4) Increasing customer service hours at MBF, whenever this
can be done without increasing operation costs under the contract,
to meet short-term or continuing customer needs.
(5) Providing a more meaningful report that can be better utilized
by management in making decisions about the MBF program.
(6) Providing additional services to authorized personnel such as
accepting and paying utility bills and implementing an overdraft
program for qualified customers.
(7) Reducing teller shortages.
At virtually all the banks we inspected both the banking and mili-
tary authorities were aware of and working toward the realization of
The contract itself represents a substantial improvement in that
virtually all the rules, regulations, fees, etc., now are covered in one
document. Under the previous system, Treasury letters and DOD
directives, issued irregularly, set the policies and procedures for the
Operation of the MBFs. The letters, often contradictory, were a con-
fusing and self-defeating method of administering the program.
Nearly all bank managers and military bank liaison officers inter-
viewed by the Subcommittee had read, and were familiar with, the
ilew contract governing their operation. They were unanimous in the
feeling that the contract allowed them sufficient flexibility in day to
day operations while providing a much needed guide to the proper
functioning of an MBF.
One of our primary recommendations in 1975 was for improved
communications between Washington and the overseas facilities.
Although minor problems remain, it is clear that both the military and
thed banking personnel in the field are in much closer contact with the
DOD banking office in Washington.
* It is clear also that progress is being made with regard to services
provided by the MBFs. As recommended by the Subcommittee, a
guaranteed overdraft program is now being implemented for service-
men who elect to send their paycheck directly to the banking facili-
ties. This should help eliminate the needless paperwork and disci-
plinary action which often accompanied a small overdraft in the past.
The Subcommittee observed that the problems of long lines and dis-
courteous service have diminished since its last investigation. These
items were major concerns of the average serviceman in 1975. Prob-
lemos are still encountered, and at some facilities the situation remains
serious, but overall there has been notable improvement.
Approximately 20 facilities have been improved or expanded in the
last two years and many more are scheduled for renovation. This
improvement in physical facilities has, in many cases, led to improved
service for the customer and improved working conditions for the
A related problem of different pay levels for American dependenfr
and German nationals employed in the MBFs has apparently been
solved to the satisfaction of all concerned.
1. We believe the Congress, for the immediate future, should con-
tinue to fully fund the operations of the overseas military banking
facilities. Although some improvements have been made, much of the'
equipment now in use at the facilities is out of date agd badly in need
of modernization. With the continued full support of the Congress,
for at least the next two fiscal years, we believe the MBFs will eventu-
ally be able to assume a greater proportion of the financial burden
2. We strongly urge both the Department of Defense and the corn-
panies operating military banking facilities to work, through expanded
service and an improved image, toward self-sufficiency. DOD, which,
is now budgeting for the facilities, should realize that the Congress will.
not, and should not, forever subsidize the MBFs as a losing operation.
The banks must recognize that the appropriation process will not
continue to cover losses indefinitely. Only through expanded services,
such as a higher loan limit and the ability of a borrower to repay from
wherever he may be stationed, will the system ever begin to prosper.
The image of the MBFs, and hence their profitability, could also be
improved greatly by the removal of unnecessary irritants such as the
penalty imposed after two savings withdrawals per month and the
various check cashing fees. These items may seem to cover costs and,
increase revenue, but they actually harm the banking facilities a great
deal in terms of public trust and esteem.
DOD's undivided authority over the MBFs is a relatively new,
development and this report can only be fairly read with that fact in
mind. It is our intention to continue to monitor the program, through
both our own resources and those of the General Accounting Office, in
the future in order to insure that both the taxpayer and the service-
man are receiving the greatest possible value from the program.
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