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Settlement Guarantee Management

3 Months Ended

Dec. 31, 2014

Settlement Guarantee Management [Abstract]

Settlement Guarantee Management

Note 5—Settlement Guarantee Management

The Company indemnifies its financial institution clients for settlement losses suffered due to failure of any other clients to fund its settlement obligations in accordance with Visa’s operating regulations. The indemnification creates settlement risk for the Company due to the difference in timing between the date of a payment transaction and the date of subsequent settlement. The exposure to settlement losses through Visa's settlement indemnification is accounted for as a settlement risk guarantee. The Company’s settlement exposure is limited to the amount of unsettled Visa payment transactions at any point in time. The Company requires certain financial institution clients that do not meet its credit standards to post collateral to offset potential loss from their estimated unsettled transactions. The Company’s estimated maximum settlement exposure was $57.6 billion at December 31, 2014, compared to $56.9 billion at September 30, 2014. Of these settlement exposure amounts, $2.9 billion and $3.2 billion were covered by collateral at December 31, 2014 and September 30, 2014, respectively.

The Company maintained collateral as follows:

	December 31, 2014				September 30, 2014
	(in millions)
Cash equivalents	$	1,041			$	961
Pledged securities at market value	142				148
Letters of credit	1,218				1,242
Guarantees	1,215				1,554
Total	$	3,616			$	3,905

The total available collateral balances presented in the table above were greater than the settlement exposure covered by customer collateral held due to instances in which the available collateral exceeded the total settlement exposure for certain financial institutions at each date presented.

The fair value of the settlement risk guarantee is estimated based on a proprietary probability-weighted model and was approximately $2 million at December 31, 2014 and September 30, 2014, respectively. These amounts are reflected in accrued liabilities on the consolidated balance sheets.

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- Definition

The entire disclosure for each guarantee obligation, or each group of similar guarantee obligations, including (a) the nature of the guarantee, including its term, how it arose, and the events or circumstances that would require the guarantor to perform under the guarantee; (b) the maximum potential amount of future payments (undiscounted) the guarantor could be required to make under the guarantee; (c) the current carrying amount of the liability, if any, for the guarantor's obligations under the guarantee; and (d) the nature of any recourse provisions under the guarantee, and any assets held either as collateral or by third parties, and any relevant related party disclosure. Excludes disclosures about product warranties.

+ References

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- Details

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