Transactions With Affiliates

12 Months Ended

Dec. 31, 2017

Note 9 – Transactions with Affiliates

As described below, Credco executes material transactions with its affiliates. The agreements between Credco and its affiliates provide that the parties intend that the transactions thereunder be conducted on an arm’s length basis. However, there can be no assurance that the terms of these arrangements are the same as would be negotiated between independent parties.

In 2017, 2016 and 2015, Credco purchased Card Member receivables and loans without recourse from TRS and certain of its subsidiaries totaling approximately $262 billion, $225 billion and $227 billion, respectively. In 2017, 2016 and 2015, Credco sold Card Member receivables and participating interests to affiliates totaling $9.4 billion, $5.7 billion and $2.6 billion, respectively. The discount revenue on purchased Card Member receivables and loans totaled $760 million, $471 million and $479 million for the years ended December 31, 2017, 2016 and 2015, respectively. The receivables agreements require TRS and its subsidiaries to perform servicing, clerical and other services necessary to bill and collect all Card Member receivables and loans owned by Credco. Since settlements under the agreements occur monthly, an amount due from, or payable to, such affiliates may arise at the end of each month.

As of December 31, 2017 and 2016, CRC owned approximately $4.1 billion and $4.0 billion, respectively, of participation interests purchased from RFC VIII.

Transactions with affiliates as of or for the years ended December 31, were as follows:

(Millions, except percentages)		2017			2016			2015
Loans to affiliates and other	$	14,527		$	10,659		$	14,262
Average interest rate on loans to affiliates and other		2.19	%		1.78	%		1.81	%
Due from affiliates	$	189		$	997		$	615
Restricted cash with affiliates		100			―			―
Short-term debt to affiliates		5,997			4,559			5,439
Average interest rate on short-term debt to affiliates		1.04	%		0.49	%		0.19	%
Maximum month-end level of short-term borrowings during the year	$	8,377		$	5,091		$	5,439
Long term debt to affiliates		270			―			―
Average interest rate on long-term debt to affiliates		0.23	%		―			―
Maximum month-end level of long-term borrowings during the year	$	270		$	―		$	―
Due to affiliates		1,988			1,517			1,727
Maximum month-end level of loans to affiliates during the year		14,527			13,083			17,711
Interest income from affiliates and other		279			207			246
Interest expense to affiliates		58			24			10
Other, net expense	$	2		$	1		$	1

Credco’s loans to affiliates represent floating-rate interest-bearing intercompany borrowings by American Express Company, other wholly owned subsidiaries of TRS and the American Express joint ventures. Revenue earned from loans to affiliates and other is recorded as interest income from affiliates and other in the Consolidated Statements of Income. As of December 31, 2017 and 2016, no amount of loss reserves has been recorded and no loans are 30 days or more past due.

The components of loans to affiliates and other as of December 31 were as follows:

(Millions)		2017		2016
American Express Limited	$	3,847	$	―
American Express Services Europe Limited		2,747		2,484
Amex Bank of Canada		1,737		1,593
American Express Australia Limited		1,616		1,290
American Express International, Inc.		1,180		―
American Express Company		961		4,044
Amex Global Holdings C.V.		888		―
American Express Company (Mexico) S.A. de C.V.		812		765
American Express Bank (Mexico) S.A.		325		291
Alpha Card S.C.R.L./C.V.B.A.		138		―
American Express International, Inc- Branch - Singapore		124		107
American Express International (NZ), Inc.		80		85
Amex Funding Management (Europe) Limited		38		―
American Express Saudi Arabia (C) JSC		34		―
Total ^(a)	$	14,527	$	10,659

As of December 31, 2017 and 2016, approximately $ 5.0 billion and $3.3 billion, respectively, were collateralized by the underlying Card Member receivables and loans transferred with recourse.

Due from/to affiliates relate primarily to timing differences from the purchase of Card Member receivables, net of remittances from TRS, as well as from operating activities. As of December 31, 2017, due to affiliates primarily represents tax liability on account of the Tax Act. Refer to Note 11 to the Consolidated Financial Statements.

As of December 31, 2017 and 2016, the amount of interest-bearing restricted cash was $100 million and nil, respectively, which represents cash placed with Amex Bank of Canada relating to the new collateralized loan arrangement for transfer of Card Member loans described above and has been included under “Other Assets” on the Consolidated Balance Sheets.

Components of short-term debt to affiliates as of December 31 were as follows:

(Millions)		2017		2016
AE Exposure Management Limited.	$	4,548	$	3,361
American Express Europe LLC		765		515
American Express Swiss Holdings GmbH		444		376
American Express Holdings Netherlands CV		192		192
Accertify Inc.		48		42
Amex Funding Management (Europe) Limited		―		73
Total	$	5,997	$	4,559

Short-term debt to affiliates consists primarily of master note agreements repayable on demand. Credco does not expect any changes to its short-term funding strategies with affiliates.

Long-term debt to affiliates represents an unsecured amount due to LB Luxembourg Two S.a.r.l amounting to $270 million and nil as of December 31, 2017 and 2016, respectively, payable by December 2020.

Service Fees to Affiliates

Credco’s affiliates do not explicitly charge Credco a servicing fee for the servicing of receivables purchased. Instead Credco receives a lower discount rate on the receivables purchased than would be the case if servicing fees were charged. If a servicing fee had been charged by these affiliates from which Credco purchases receivables, fees to affiliates for servicing receivables would have been approximately $234 million, $253 million and $242 million for the years ended December 31, 2017, 2016 and 2015, respectively. Correspondingly, discount revenue would have increased by approximately the same amounts in these periods.