Title 12 — Banks and BankingRelease 119-73not60
§4401 Findings and Purpose
Title 12 › Chapter 45— PAYMENT SYSTEM RISK REDUCTION › Subchapter I— BILATERAL AND CLEARING ORGANIZATION NETTING › § 4401
Summary
Makes netting — combining what financial firms owe each other into one amount — valid and legally binding if a participating firm closes. Financial firms do thousands of transactions each day. Netting speeds processing and lowers risk to the whole financial system.
Full Legal Text
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.
Legislative History
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.
Reference
Citations & Metadata
Citation
12 U.S.C. § 4401
Title 12 — Banks and Banking
Last Updated
Apr 3, 2026
Release point: 119-73not60