Settlement Guarantee Management

3 Months Ended

Dec. 31, 2017

Settlement Guarantee Management [Abstract]

Note 5—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 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 $71.3 billion during the three months ended December 31, 2017, compared to $67.7 billion during the three months ended September 30, 2017. Of these amounts, $4.5 billion and $2.8 billion were covered by collateral at December 31, 2017 and September 30, 2017, respectively. The total available collateral balances presented in the table below 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 Company maintained collateral as follows:



	December 31, 2017		September 30, 2017
	(in millions)
Cash equivalents⁽¹⁾	$	1,569	$	1,490
Pledged securities at market value	169		167
Letters of credit	1,319		1,316
Guarantees	617		941
Total	$	3,674	$	3,914


⁽¹⁾	Cash collateral held by Visa Europe is not included on the Company's consolidated balance sheets 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 fair value of the settlement risk guarantee is estimated based on a proprietary probability-weighted model and was approximately $3 million at December 31, 2017 and September 30, 2017. These amounts are reflected in accrued liabilities on the Company's consolidated balance sheets.