§4401 — Title 12 Banks and Banking | U.S. Code

Summary

The law says when banks and other financial firms add up and cancel what they owe each other (called netting), those results must be legal and binding even if one firm closes. These firms do thousands of transactions every day, and netting—when contracts allow—speeds processing and lowers risk to the whole financial system.

Title 12, §4401

Banks and Banking — Source: USLM XML via OLRC

The Congress finds that—

(1)many financial institutions engage daily in thousands of transactions with other financial institutions directly and through clearing organizations;

(2)the efficient processing of such transactions is essential to a smoothly functioning economy;

(3)such transactions can be processed most efficiently if, consistent with applicable contractual terms, obligations among financial institutions are netted;

(4)such netting procedures would reduce the systemic risk within the banking system and financial markets; and

(5)the effectiveness of such netting procedures can be assured only if they are recognized as valid and legally binding in the event of the closing of a financial institution participating in the netting procedures.

Notes & Related Subsidiaries

Statutory Notes and Related Subsidiaries

SeparabilityIf any provision of Pub. L. 102–242 or any application of any provision thereof to any person or circumstance is held invalid, the remainder of Pub. L. 102–242 and the application of any remaining provision of such Act to any other person or circumstance not to be affected by such holding, see section 481 of Pub. L. 102–242, set out as a note under section 1811 of this title.

§4401 Findings and purpose

Summary

Title 12, §4401

Notes & Related Subsidiaries

Statutory Notes and Related Subsidiaries

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