12 U.S.C. § 4401 — Findings and purpose

Page 1633 TITLE 12—BANKS AND BANKING § 4402 1 See References in Text note below. Sec. 4402. Definitions. 4403. Bilateral netting. 4404. Clearing organization netting. 4405. Preemption. 4406. Relationship to other payments systems. 4406a. Treatment of contracts with uninsured na- tional banks, uninsured Federal branches and agencies, certain uninsured State mem- ber banks, and Edge Act corporations. 4407. National emergencies. SUBCHAPTER II—MULTILATERAL CLEARING ORGANIZATIONS 4421, 4422. Repealed. SUBCHAPTER I—BILATERAL AND CLEARING ORGANIZATION NETTING § 4401. Findings and purpose The Congress finds that— (1) many financial institutions engage daily in thousands of transactions with other finan- cial institutions directly and through clearing organizations; (2) the efficient processing of such trans- actions is essential to a smoothly functioning economy; (3) such transactions can be processed most efficiently if, consistent with applicable con- tractual 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 proce- dures can be assured only if they are recog- nized as valid and legally binding in the event of the closing of a financial institution par- ticipating in the netting procedures. (Pub. L. 102–242, title IV, § 401, Dec. 19, 1991, 105 Stat. 2371.) Statutory Notes and Related Subsidiaries SEPARABILITY If 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. § 4402. Definitions For purposes of this subchapter— (1) Broker or dealer The term ‘‘broker or dealer’’ means— (A) any company that is registered or li- censed under Federal or State law to engage in the business of brokering, underwriting, or dealing in securities in the United States; and (B) to the extent consistent with this title,1 as determined by the Board of Gov- ernors of the Federal Reserve System, any company that is an affiliate of a company described in subparagraph (A) and that is en- gaged in the business of entering into net- ting contracts. (2) Clearing organization The term ‘‘clearing organization’’ means a clearinghouse, clearing association, clearing corporation, or similar organization— (A) that provides clearing, netting, or set- tlement services for its members and— (i) in which all members other than the clearing organization itself are financial institutions or other clearing organiza- tions; or (ii) which is registered as a clearing agency under the Securities Exchange Act of 1934 [15 U.S.C. 78a et seq.], or is exempt from such registration by order of the Se- curities and Exchange Commission; or (B) that is registered as a derivatives clearing organization under section 7a–1 of title 7, that has been granted an exemption under section 6(c)(1) of title 7, or that is a multilateral clearing organization (as de- fined in section 4421 1 of this title). (3) Covered clearing obligation The term ‘‘covered clearing obligation’’ means an obligation of a member of a clearing organization to make payment to another member of a clearing organization, subject to a netting contract. (4) Covered contractual payment entitlement The term ‘‘covered contractual payment en- titlement’’ means— (A) an entitlement of a financial institu- tion to receive a payment, subject to a net- ting contract from another financial institu- tion; and (B) an entitlement of a member of a clear- ing organization to receive payment, subject to a netting contract, from another member of a clearing organization of a covered clear- ing obligation. (5) Covered contractual payment obligation The term ‘‘covered contractual payment ob- ligation’’ means— (A) an obligation of a financial institution to make payment, subject to a netting con- tract to another financial institution; and (B) a covered clearing obligation. (6) Depository institution The term ‘‘depository institution’’ means— (A) a depository institution as defined in section 19(b)(1)(A) of the Federal Reserve Act [12 U.S.C. 461(b)(1)(A)] (other than clause (vii)); (B) an uninsured national bank or an unin- sured State bank that is a member of the Federal Reserve System, if the national bank or State member bank is not eligible to make application to become an insured bank under section 1815 of this title; (C) a branch or agency of a foreign bank, a foreign bank and any branch or agency of the foreign bank, or the foreign bank that established the branch or agency, as those terms are defined in section 1(b) of the Inter- national Banking Act of 1978 [12 U.S.C. 3101]; (D) a corporation chartered under section 25(a) 1 of the Federal Reserve Act [12 U.S.C. 611 et seq.]; or