Title 12 — Banks and BankingRelease 119-73not60
§4403 Bilateral Netting
Title 12 › Chapter 45— PAYMENT SYSTEM RISK REDUCTION › Subchapter I— BILATERAL AND CLEARING ORGANIZATION NETTING › § 4403
Summary
Agreements that let two financial firms offset what they owe each other must be used to end, settle, speed up, and net their payment obligations and claims. This rule applies despite other state or federal laws except for section 1821(e), section 5390(c), section 4617, section 1787(c) of this title, orders under section 78eee(b)(2) of title 15, and as limited by section 561(b)(2) of title 11. Each firm only has to pay, or only has the right to receive, the net amount shown by the agreement. If a firm fails, any net amount due it is paid under the agreement. Related security or credit‑support deals are also enforceable under the same exceptions.
Full Legal Text
Title 12, §4403
Banks and Banking — Source: USLM XML via OLRC
(a)Notwithstanding any other provision of State or Federal law (other than section 1821(e) of this title, section 5390(c) of this title, section 4617 of this title, section 1787(c) of this title, or any order authorized under section 78eee(b)(2) of title 15), the covered contractual payment obligations and the covered contractual payment entitlements between any 2 financial institutions shall be terminated, liquidated, accelerated, and netted in accordance with, and subject to the conditions of, the terms of any applicable netting contract (except as provided in section 561(b)(2) of title 11).
(b)The only obligation, if any, of a financial institution to make payment with respect to covered contractual payment obligations to another financial institution shall be equal to its net obligation to such other financial institution, and no such obligation shall exist if there is no net obligation.
(c)The only right, if any, of a financial institution to receive payments with respect to covered contractual payment entitlements from another financial institution shall be equal to its net entitlement with respect to such other financial institution, and no such right shall exist if there is no net entitlement.
(d)The net entitlement of any failed financial institution, if any, shall be paid to the failed financial institution in accordance with, and subject to the conditions of, the applicable netting contract.
(e)This section shall be given effect notwithstanding that a financial institution is a failed financial institution.
(f)The provisions of any security agreement or arrangement or other credit enhancement related to one or more netting contracts between any 2 financial institutions shall be enforceable in accordance with their terms (except as provided in section 561(b)(2) of title 11), and shall not be stayed, avoided, or otherwise limited by any State or Federal law (other than section 1821(e) of this title, section 1787(c) of this title, and section 78eee(b)(2) of title 15).
Legislative History
Notes & Related Subsidiaries
Editorial Notes
Amendments
2010—Subsec. (a). Pub. L. 111–203 inserted “section 5390(c) of this title, section 4617 of this title,” after “section 1821(e) of this title,”. 2006—Subsec. (a). Pub. L. 109–390 struck out “paragraphs (8)(E), (8)(F), and (10)(B) of” before “section 1821(e)” and “section 1787(c)” and inserted “terminated, liquidated, accelerated, and” after “institutions shall be”. Subsec. (f). Pub. L. 109–390, § 4(a)(1), struck out “paragraphs (8)(E), (8)(F), and (10)(B) of” before “section 1821(e)” and “section 1787(c)”. 2005—Subsec. (a). Pub. L. 109–8, § 906(b)(1), added subsec. (a) and struck out heading and text of former subsec. (a). Text read as follows: “Notwithstanding any other provision of law, the covered contractual payment obligations and the covered contractual payment entitlements between any 2 financial institutions shall be netted in accordance with, and subject to the conditions of, the terms of any applicable netting contract.” Subsec. (f). Pub. L. 109–8, § 906(b)(2), added subsec. (f).
Statutory Notes and Related Subsidiaries
Effective Date
of 2010 AmendmentAmendment by Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an
Effective Date
note under section 5301 of this title.
Effective Date
of 2006 AmendmentAmendment by Pub. L. 109–390 not applicable to any cases commenced under Title 11, Bankruptcy, or to appointments made under any Federal or State law, before Dec. 12, 2006, see section 7 of Pub. L. 109–390, set out as a note under section 101 of Title 11.
Effective Date
of 2005 AmendmentAmendment by Pub. L. 109–8 effective 180 days after Apr. 20, 2005, and not applicable with respect to cases commenced under Title 11, Bankruptcy, before such
Effective Date
, except as otherwise provided, see section 1501 of Pub. L. 109–8, set out as a note under section 101 of Title 11.
Reference
Citations & Metadata
Citation
12 U.S.C. § 4403
Title 12 — Banks and Banking
Last Updated
Apr 3, 2026
Release point: 119-73not60