Settlement Guarantee Management

9 Months Ended

Jun. 30, 2016

Settlement Guarantee Management [Abstract]

Note 7—Settlement Guarantee Management

The Company indemnifies its 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 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 $64.0 billion for the quarter ended June 30, 2016, including Visa Europe, compared to $43.5 billion for the quarter ended September 30, 2015. Of these amounts, $2.8 billion and $2.2 billion were covered by collateral at June 30, 2016 and September 30, 2015, respectively.

The Company maintained collateral as follows:



	June 30, 2016		September 30, 2015
	(in millions)
Cash equivalents	$	1,266	$	1,023
Pledged securities at market value	159		154
Letters of credit	1,275		1,178
Guarantees	1,365		971
Total	$	4,065	$	3,326

The balances above included collateral held by Visa Europe as follows:



	June 30, 2016
	(in millions)
Cash equivalents ⁽¹⁾	$	233
Pledged securities at market value	—
Letters of credit	164
Guarantees	326
Total	$	723


⁽¹⁾	Cash collateral held by Visa Europe is not included on the Company's unaudited consolidated balance sheet as its clients retain beneficial ownership and the cash is only accessible to the Company in the event of default by the client on its settlement obligations.

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 and $1 million at June 30, 2016 and September 30, 2015, respectively. These amounts are reflected in accrued liabilities on the consolidated balance sheets.