[Code of Federal Regulations] [Title 32, Volume 2] [Revised as of July 1, 2008] From the U.S. Government Printing Office via GPO Access [CITE: 32CFR231.5] [Page 477-483] TITLE 32--NATIONAL DEFENSE CHAPTER I--OFFICE OF THE SECRETARY OF DEFENSE (CONTINUED) PART 231_PROCEDURES GOVERNING BANKS, CREDIT UNIONS AND OTHER FINANCIAL Subpart A_Guidelines Sec. 231.5 Procedures--domestic banks. (a) General policy. Given their role in promoting morale and welfare, on-base banks shall be recognized and assisted by DoD Components at all levels. (b) Establishment. (1) The following information shall be included in the installation commander's request to the Secretary of the Military Department concerned (or designee) for establishment of banking offices: (i) The approximate number of DoD personnel at the installation, and other persons who may be authorized to use the banking office. (ii) The distance between the installation and the financial institutions in the vicinity, and the names of those institutions. (iii) Available transportation between the installation and the financial institutions listed in paragraph (b)(1)(ii) of this section. (iv) The number of DoD personnel in duty assignments that confine them to the installation or who cannot obtain transportation (such as hospital patients). (v) The name and location of the depositary used to make official deposits for credit to the TGA. (vi) A list of organizational and nonappropriated fund accounts, the name and location of the financial institutions where deposited, and the average daily activity and balance of each account. (vii) A written description and photographs of the space proposed for banking office use. (viii) A statement listing the requirements of the proposed banking office for safes and a vault, alarm systems, and surveillance equipment, when necessary. (ix) Reasons for use of space controlled by the General Services Administration (GSA). All the GSA assigned space, whether leased space or federal office building space, is reimbursable to the GSA at the standard level user charge. As such, space occupied by a banking office to serve military needs will be assigned and charged by the GSA. (x) Any other information pertinent to the establishment of a banking office. [[Page 478]] (2) The Secretary of the Military Departments (or designee) shall: (i) Review each request for the establishment of banking offices. (ii) Conduct a solicitation for the services when warranted. (iii) Approve proposals for banking offices. (iv) Notify the selected financial institution either directly or through the installation commander. The selected banking institution will, in turn, obtain operating authority from their regulating agencies. (v) Forward proposals to establish TGAs to the DFAS for subsequent forwarding to the Fiscal Assistant Secretary of the Treasury in accordance with Volume 5, Chapter 5, paragraph 050102 of The DoD Financial Management Regulation (7000.14-R). (c) Solicitations. The Secretary of the Military Department concerned (or designee), or the installation commander with advice from the cognizant Secretary of the Military Department (or designee), shall conduct solicitations to include pre-proposal conferences for on-base banking. Subject to the criteria for selection outlined in paragraph (c)(4) of this section the preferred sources of on-base financial services at domestic installations are federally-insured, state- chartered or federally-insured, federally-chartered banking institutions operating in the local area. The guidance at paragraph (c)(1) of this section addresses distribution of the solicitation only and does not preclude any federally-insured, state-chartered or federally-insured, federally-chartered banking institution from responding at any stage (from local distribution in paragraph (c)(1)(i) of this section to publication in the Commerce Business Daily and financial institution trade journals as outlined in paragraph (c)(1)(iii) of this section of the solicitation process. No commitment may be made to any banking institution regarding its proposal until a designation is made by the appropriate regulatory agency. (1) Solicitations for banking services shall be accomplished in the following order: (i) Solicitation letters will be sent to local banking institutions and a solicitation announcement will be published in the local newspaper(s) and forwarded to financial institution associations. (ii) If the Secretary of the Military Department concerned (or designee) or, where delegated, the installation commander, determines that the geographic scope of the solicitation needs to be expanded, a prospectus will be forwarded to financial institutions in a larger geographic area, as well as financial institution associations and regulatory authorities in the state where the installation is located. (iii) If the Secretary of the Military Department concerned (or designee) or, where delegated, the installation commander, determines that the geographic scope of the solicitation needs to be expanded further, the prospectus will be published in the Commerce Business Daily and financial institution trade journals. (2) For solicitations conducted at the installation level, the installation commander shall review proposals to establish banking offices, select the banking institution making the best offer and forward a recommendation to the Secretary of the Military Department concerned (or designee) for final approval. (3) Banking institutions shall not be coerced when banking arrangements are under consideration or after banking offices are established. If otherwise proper, this prohibition does not preclude: (i) Discussions with banking institutions prior to submitting a proposal for a new banking office. (ii) Helping banking offices extend their operations in support of an installation requirement. (iii) Discussions with banking institutions to improve services or to create savings for the banking institution or DoD personnel. (iv) Seeking proposals for banking service as directed by the Secretary of the Military Department concerned (or designee). (v) Negotiations preparatory to signing a banking agreement. (4) When soliciting for banking services, proposals shall be evaluated on specific factors identified in the solicitation. These factors, at a minimum, shall be predicated on the services to be provided as outlined in appendix A, [[Page 479]] paragraph 3, of this part, the financial institution's schedule of service fees and charges, and the extent of logistical support required. Prior to issuance of the solicitation, the preparing office shall identify (for internal use during the subsequent evaluation period) the weights to be applied to the factors reflected in the solicitation. Proposals shall be evaluated and ultimate selection made based upon the factors and weights developed for the solicitation. (5) The Secretary of the Military Department concerned (or designee), or the installation commander with advice from the cognizant Secretary of the Military Department (or designee), shall make the selection of the banking institution based on the provisions outlined in this section. (d) Terminations. (1) Requests for termination of financial services shall be approved by the installation commander, substantiated by sufficient evidence and forwarded to the Secretary of the Military Department concerned (or designee). The termination of banking office operations shall be initiated by the installation commander only under one of the following conditions: (i) The mission of the installation has changed, or is scheduled to be changed, thereby eliminating or substantially reducing the requirement for financial services. (ii) Active military operations prevent continuation of on-base financial services. (iii) Performance of the banking office in providing services is not satisfactory according to standards ordinarily associated with the financial services industry or is inconsistent with the operating agreements or the procedures prescribed herein. (iv) When merger, acquisition, change of control or other action results in violation of the terms and conditions of the existing operating agreement, the Secretary of the Military Department (or designee) shall terminate the operating agreement with the existing banking institution. When the merger, acquisition, change of control or other action does not result in violation of the terms and conditions of the existing operating agreement, the Secretary of the Military Department (or designee) shall initiate a novation action of the operating agreement identifying the change in control. (2) The installation commander shall forward requests for termination to the Secretary of the Military Department concerned (or designee). The Secretary of the Military Department (or designee) shall coordinate all termination actions with the USD(C), through the Director, DFAS, before notification to the appropriate regulatory agency. Subsequent to this coordination process: (i) The Secretary of the Military Department (or designee) shall inform the regulatory agency of the action. (ii) The installation commander shall revoke the authority of the financial institution to operate. The lease will be terminated. (3) Any banking office that intends to terminate its operations should notify the installation commander at least 180 days before the closing date. This notification should precede any public announcement of the planned closure. When appropriate, the commander shall attempt to negotiate an agreement permitting the banking office to continue operations until the installation has made other arrangements. Immediately upon notification of a closing, the commander shall advise the DoD Component headquarters concerned. If it is determined that continuation of banking services is justified, action to establish another banking office shall be taken in accordance with the guidance prescribed herein. (e) Use of space, logistical support, and military real property for domestic banks.--(1) Lease Terms. (i) The consideration for a lease shall be determined by appraisal of fair market rental value in accordance with 10 U.S.C. 2667. Periodic reappraisals shall be based upon the fair market rental value exclusive of the improvements made by the banks. (ii) The term of the lease shall not exceed 5 years except where the banking institution uses its own funds to improve existing government space as outlined in paragraph (e)(5) of this section. If space occupied is assigned by [[Page 480]] the GSA, charges to financial institutions for space and services shall be at the GSA standard level user rate. (iii) Leases shall include the following provisions: (A) The government has the right to terminate the lease due to national emergency; installation inactivation, closing, or other disposal action; or default by the lessee. (B) The lessee shall provide written notice 180 days prior to voluntarily terminating the lease. (C) Upon a lease termination, the government has the option to cause the title of all structures and other improvements to be conveyed to the United States without reimbursement, or require the lessee to remove the improvements and restore the land to its original condition. (2) Logistical support. (i) The banking office shall be housed in a building accessible to DoD personnel on the installation and in a location permitting reasonable security. (ii) Banking institutions shall perform all maintenance, repair, improvements, alterations, and construction on the banking premises. (iii) Banking institutions shall pay for all utilities (i.e., electricity, natural gas or fuel oil, water and sewage), heating and air conditioning, intrastation telephone service, and custodial and janitorial services to include garbage disposal and outdoor maintenance (such as grass cutting and snow removal) at rates set forth in the lease, operating agreement or other written agreement between the installation and the banking institution. (3) Leases executed before the issuance of this part may not be altered solely as a result of the provisions of this part unless a lessee specifically requests a renegotiation under these provisions. No lease may be negotiated or renegotiated, nor may any rights be waived or surrendered without compensation to the government. (4) When a banking institution participates in the construction of a shopping mall complex the lease shall cover only land where the banking office physically is located. (5) When a banking institution uses its own funds to improve existing government space, leases, for a period not to exceed 25 years subject to periodic review every 5 years to assess changes in fair market value, may be negotiated for a period commensurate with the appraised value of the leasehold improvements divided by the annual lease fee. (f) Land leases. (1) A lease for construction of a building to house a banking office shall be at the appraised fair market rental value. Charges shall apply for the term of the lease not to exceed 25 years, subject to periodic review every 5 years to assess changes in fair market value. (2) If determined to be in the government's interest, an existing lease of land may be extended prior to expiration of its term. Passage of title to facilities shall be deferred until all extensions have expired. Such extensions shall be for periods not to exceed 5 years with lease payments set at the appraised fair market rental of the land only as determined on the date of each such extension. Banking institution lessees shall continue to maintain the premises and pay for utilities and services furnished. (3) When, under the terms of a lease, title to improvements passes to the government, arrangements normally will be made as follows: (i) When the square footage involved exceeds that authorized in DoD 4270.1-M \9\, the banking institution shall be given first choice to continue occupying the excess space under a lease that provides for fair market rental for the land underlying that excess space. --------------------------------------------------------------------------- \9\ See footnote 1 to Sec. 231.1(a). --------------------------------------------------------------------------- (ii) The charge for continued occupancy of improved space by a banking office shall be at fair market rental value only for the associated land. The lessee shall continue to maintain the premises and pay the cost of utilities and services furnished. (g) Construction. Banks may construct buildings subject to the following provisions: (1) The building shall be solely for the use of the banking institution and may not provide for other commercial enterprises or government instrumentalities. (2) Construction projects must meet the criteria in DoD 4270.1-M. [[Page 481]] (3) Construction projects approval authority. (i) Projects costing $25,000 or more shall be approved by the Major Command with an information copy sent to the Secretary of the Military Department concerned (or designee). The Secretary of the Military Department (or designee) shall have 30 days to provide comments to the Major Command before final approval can be granted. (ii) Projects costing less than $25,000, to include interior alterations and room or office additions to existing banking offices, shall be approved by installation commanders. Copies of approvals, including the identification of project cost, shall be furnished to the Secretary of the Military Department concerned (or designee). (4) The Congress shall be notified of all construction projects, using other than appropriated funds and costing over $500,000, in accordance with DoD Instruction 7700.18 \10\. --------------------------------------------------------------------------- \10\ See footnote 1 to Sec. 231.1(a). --------------------------------------------------------------------------- (5) Proposals for construction of structures on installations at a banking institution's expense shall be reviewed and reported in accordance with regulations of the Military Department concerned. The following information shall be listed to support each proposal: (i) Number of DoD personnel at the installation plus others who may use the banking office. (ii) Square footage of the proposed building. (iii) Land area to be leased to the banking institution. (iv) Term of the lease. (v) Estimated cost of construction. (vi) Estimated fair market value of the land to be leased. (vii) Statement that the banking institution will be responsible for utility connections and other utility and maintenance costs. (viii) Statement that the building will be used only for financial services. (ix) A statement that financial institution officials understand the potential loss of the building in the event of installation closure or other delimiting condition. (x) Justification for a waiver of space criteria if the building exceeds that specified in DoD 4270.1-M. (6) Banks shall pay for interior alterations and maintenance as well as utilities, custodial, and other furnished services. (7) Banks shall pay all construction costs. (h) Bank liaison officer (BLO). Each installation commander having an on-base banking office shall appoint a BLO. The BLO's name and duty telephone number shall be displayed prominently at each banking office on the installation. As appropriate, the BLO's responsibility shall be assigned to comptroller or resource management personnel. Employees, officials or directors of a financial institution may not serve as BLOs. The BLO shall: (1) Ensure that the banking institution operating the banking office has the latest version of this part. (2) Ensure that traveler's checks and money orders are not being sold by other on-base organizations when banking offices are open for business. Postal units and credit unions, however, are exempt from this restriction. Also, ensure that other financial services, to include vehicle financing on domestic installations, are offered only by the banking office. (3) Attend financial workshops, conferences, and seminars as appropriate. These gatherings offer excellent opportunities for personnel of financial institutions and the Department to improve the military banking program. Free discussion among the attendees gives an excellent forum for planning, developing, and reviewing programs that improve financial services made available to DoD personnel and organizations. (4) Assist, when requested by the banking office manager or the installation commander, in locating and collecting from individuals tendering uncollectable checks, overdrawing accounts, or defaulting on loans (within the guidelines of subpart C) if not otherwise prohibited by law. (5) Maintain regular contact with the banking office manager to confer and discuss quantitative and qualitative improvements in the services provided. In executing this authority, the BLO [[Page 482]] shall not become involved in the internal operations of the financial institution. (6) Review the schedule of service charges and fees annually, and ensure that the operating agreement is updated at least every 5 years. Renegotiate the financial services offered and related service charges and fees as necessary. (7) Assist in resolving customer complaints about banking services. (8) Assist in resolving complaints of discrimination with financial services by the banking institution. If a complaint cannot be resolved, a written request for investigation shall be forwarded to the appropriate regulatory agency. Any such request must document the problem and command efforts taken toward its resolution. Information copies of all related correspondence shall be sent through channels to the Secretary of the Military Department concerned (or designee) for transmittal to the DFAS. (9) Assist the installation commander to report to the appropriate regulatory agency any evidence suggesting malpractice by banking office personnel. (i) In-store banking. Under the direction and approval of the installation commander, an on-base financial institution may provide in- store banking within the premises of a commissary operated by the Defense Commissary Agency, a Military Exchange, or any other on-base retail facility. (1) Provision of the requested services, and any associated stipulations, shall be documented as an amendment to the existing operating agreement between the installation commander and the on-base financial institution that will provide in-store services. (2) The amendment to the operating agreement shall be drafted through close coordination between the requesting DoD Component representative, the on-base financial institution representative, the bank liaison officer, and the installation commander (or designee). The final amendment shall be signed by the installation commander and the on-base financial institution with the acknowledgement of the DoD Component that will host the in-store banking operation. (3) The installation commander shall extend the opportunity to provide the requested in-store banking services to all financial institutions located on the installation. The selection process is outlined in Appendix B of this part. (4) Space shall be granted by the installation commander through a lease to the banking institution that will provide in-store service. (j) Domestic military banking facilities (MBFs)--(1) Domestic MBF establishment. (i) Requests to establish MBFs shall be made only when a need for services cannot be met by other means. During mobilization, however, MBFs may be designated as an emergency measure. (ii) Installation commanders shall send requests for an MBF with justification for its establishment through the Secretary of the Military Department concerned (or designee) to the Director, DFAS, for coordination with the Department of the Treasury. The Department of the Treasury may approve the designation of an MBF under provisions of 12 U.S.C. 265. (iii) MBF operations may begin only after approval for MBF status is granted by the Department of the Treasury. (2) MBF conversion. (i) Where MBFs exist, installation commanders shall encourage their conversion to independent or branch banks. (ii) Proposals from the on-base banking institution to convert an existing MBF to an independent or branch bank shall be sent through command channels to the Secretary of the Military Department concerned (or designee) for approval. The Secretary of the Military Department (or designee) shall forward the request to the Director, DFAS, for coordination with the Department of the Treasury. (iii) Unsolicited proposals from banking institutions to establish independent or branch banks where an MBF exists shall be forwarded through command channels to the Secretary of the Military Department concerned (or designee). Each proposal shall be evaluated on its own merits. (A) The installation commander shall inform the banking institution operating the MBF that an unsolicited proposal for a banking office has been received and shall offer that incumbent [[Page 483]] institution the opportunity to submit its own proposal. (B) Preference to operate an independent or branch bank shall be given to the banking institution that has operated the MBF, provided that the banking service previously rendered has been satisfactory and that the institution's proposal is adequate. (3) MBF termination. The Director, DFAS, shall coordinate the termination of a financial institution's authority to operate an MBF with the Department of the Treasury. [66 FR 46708, Sept. 7, 2001; 66 FR 54136, Oct. 26, 2001]