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1.0.0.3 false Settlement and Travelers Cheque Risk Management false 1 $ false false iso4217_USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 iso4217_USD_per_shares Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares 0 shares Standard http://www.xbrl.org/2003/instance shares 0 5 Settlement and Travelers Cheque Risk Management 3 ma_SettlementAndTravelersChequeRiskManagementDisclosureTextBlock ma false na duration string Settlement and Travelers Cheque Risk Management Disclosure false false false false false false false false false 1 false false 0 0 <div> Note 22. Settlement and Travelers Cheque Risk Management MasterCard International’s rules generally guarantee the payment of certain MasterCard, Cirrus and Maestro branded transactions between its principal members. The term and amount of the guarantee are unlimited. Settlement risk is the exposure to members under MasterCard International’s rules (“Settlement Exposure”), due to the difference in timing between the payment transaction date and subsequent settlement. Settlement Exposure is estimated using the average daily card charges during the quarter multiplied by the estimated number of days to settle. The Company has global risk management policies and procedures, which include risk standards, to provide a framework for managing the Company’s settlement risk. Member-reported transaction data and the transaction clearing data underlying the settlement risk calculation may be revised in subsequent reporting periods. In the event that MasterCard International effects a payment on behalf of a failed member, MasterCard International may seek an assignment of the underlying receivables. Subject to approval by the Board of Directors, members may be charged for the amount of any settlement loss incurred during the ordinary activities of the Company. MasterCard requires certain members that are not in compliance with the Company’s risk standards in effect at the time of review to post collateral, typically in the form of cash, letters of credit, and bank guarantees. This requirement is based on management review of the individual risk circumstances for each member that is out of compliance. In addition to these amounts, MasterCard holds collateral to cover variability and future growth in member programs. The Company also holds collateral to pay merchants in the event of merchant bank/acquirer failure. Although it is not contractually obligated under MasterCard International’s rules to effect such payments to merchants, the Company may elect to do so to protect brand integrity. MasterCard monitors its credit risk portfolio on a regular basis and the adequacy of collateral on hand. Additionally, from time to time, the Company reviews its risk management methodology and standards. As such, the amounts of estimated settlement risk are revised as necessary. Estimated Settlement Exposure, and the portion of the Company’s uncollateralized Settlement Exposure for MasterCard-branded transactions that relates to members that are deemed not to be in compliance with, or that are under review in connection with, the Company’s risk management standards, were as follows:   <table cellspacing="0" cellpadding="0" width="92%" align="center" border="0"> <tr> <td width="71%"></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="2">2009</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="2">2008</td> <td valign="bottom"> </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> MasterCard-branded transactions: </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Gross Settlement Exposure </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">26,373,185</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">21,179,044</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Collateral held for Settlement Exposure </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(2,759,105</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(1,813,171</td> <td valign="bottom" nowrap="nowrap">) </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> </tr> <tr> <td valign="top"> Net uncollateralized Settlement Exposure </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">23,614,080</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">19,365,873</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> </tr> <tr> <td height="8"></td> <td colspan="4" height="8"></td> <td colspan="4" height="8"></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Uncollateralized Settlement Exposure attributable to non-compliant members </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">210,618</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">56,795</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> </tr> <tr> <td height="8"></td> <td colspan="4" height="8"></td> <td colspan="4" height="8"></td> </tr> <tr> <td valign="top"> Cirrus and Maestro transactions: </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Gross Settlement Exposure </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,433,112</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,236,175</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> </tr> </table> Although MasterCard holds collateral at the member level, the Cirrus and Maestro estimated settlement exposures are calculated at the regional level. Therefore, these settlement exposures are reported on a gross basis, rather than net of collateral.   Of the total estimated Settlement Exposure under the MasterCard brand, net of collateral, the U.S. accounted for approximately 40% and 49% at December 31, 2009 and 2008, respectively. The second largest country that accounted for this Settlement Exposure was the United Kingdom, at approximately 9% and 10% at December 31, 2009 and 2008, respectively. A significant portion of the increase in Gross Settlement Exposure is attributable to an affiliate member domiciled outside the U.S. which became a principal member during 2009. Of the total uncollateralized Settlement Exposure attributable to non-compliant members, five members represented approximately 56% and 48% at December 31, 2009 and December 31, 2008, respectively. MasterCard guarantees the payment of MasterCard-branded travelers cheques in the event of issuer default. The guarantee estimate is based on all outstanding MasterCard-branded travelers cheques, reduced by an actuarial determination of cheques that are not anticipated to be presented for payment. The term and amount of the guarantee are unlimited. MasterCard calculated its MasterCard-branded travelers cheques exposure under this guarantee as $400,832 and $446,679 at December 31, 2009 and December 31, 2008, respectively. The reduction in travelers cheques exposure is attributable to MasterCard branded travelers cheques no longer being issued. A significant portion of the Company’s travelers cheques risk is concentrated in one MasterCard travelers cheques issuer. MasterCard has obtained an unlimited guarantee estimated at $313,009 and $348,995 at December 31, 2009 and December 31, 2008, respectively, from a financial institution that is a member, to cover all of the exposure of outstanding travelers cheques with respect to such issuer. In addition, MasterCard has obtained a limited guarantee estimated at $14,481 and $15,949 at December 31, 2009 and December 31, 2008, respectively, from a financial institution that is a member in order to cover the exposure of outstanding travelers cheques with respect to another issuer. These guarantee amounts have also been reduced by an actuarial determination of travelers cheques that are not anticipated to be presented for payment. Beginning in 2008 and continuing in 2009, many of the Company’s financial institution customers were directly and adversely impacted by the unprecedented events that occurred in the financial markets around the world. The ongoing economic turmoil presents increased risk that the Company may have to perform under its settlement and travelers cheque guarantees. The Company’s global risk management policies and procedures, which are revised and enhanced from time to time, continue to be effective as evidenced by the historically low level of losses that the Company has experienced from customer financial institution failures, including no losses in the last several years. The Company enters into business agreements in the ordinary course of business under which the Company agrees to indemnify third parties against damages, losses and expenses incurred in connection with legal and other proceedings arising from relationships or transactions with the Company. As the extent of the Company’s obligations under these agreements depends entirely upon the occurrence of future events, the Company’s potential future liability under these agreements is not determinable. </div> Note 22. 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