Settlement Guarantee Management

3 Months Ended

Dec. 31, 2015

Settlement Guarantee Management [Abstract]

Settlement Guarantee Management

Note 7—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 the Visa Rules. This 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 $42.5 billion for the quarter ended December 31, 2015, compared to $43.5 billion for the quarter ended September 30, 2015. Of these amounts, $2.2 billion were covered by collateral at December 31, 2015 and September 30, 2015.

The Company maintained collateral as follows:

	December 31, 2015		September 30, 2015
	(in millions)
Cash equivalents	$	1,041	$	1,023
Pledged securities at market value	151		154
Letters of credit	1,131		1,178
Guarantees	935		971
Total	$	3,258	$	3,326

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 $1 million at December 31, 2015 and September 30, 2015. These amounts are reflected in accrued liabilities on the consolidated balance sheets.