12 U.S.C. § 4403 — Bilateral netting

Page 1635 TITLE 12—BANKS AND BANKING § 4403 ‘‘means a contract or agreement between 2 or more fi- nancial institutions or members, that— ‘‘(I) is governed by the laws of the United States, any State, or any political subdivision of any State, and ‘‘(II) provides for netting present or future payment obligations or payment entitlements (including liq- uidation or close-out values relating to the obliga- tions or entitlements) among the parties to the agreement; and’’. Par. (15). Pub. L. 109–8, § 906(a)(5), added par. (15). 2000—Pub. L. 106–554, § 1(a)(5) [title I, § 112(a)(2)], sub- stituted ‘‘this subchapter’’ for ‘‘this chapter’’ in intro- ductory provisions. Par. (2)(B). Pub. L. 106–554, § 1(a)(5) [title I, § 123(b)], added subpar. (B) and struck out former subpar. (B) which read as follows: ‘‘that performs clearing func- tions for a contract market designated pursuant to the Commodity Exchange Act.’’ 1992—Par. (14)(B). Pub. L. 102–550 substituted ‘‘Fed- eral law’’ for ‘‘Federal commodities law’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2005 AMENDMENT Amendment 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 ef- fective date, except as otherwise provided, see section 1501 of Pub. L. 109–8, set out as a note under section 101 of Title 11. EFFECTIVE DATE OF 1992 AMENDMENT Amendment by Pub. L. 102–550 effective as if included in the Federal Deposit Insurance Corporation Improve- ment Act of 1991, Pub. L. 102–242, as of Dec. 19, 1991, see section 1609(a) of Pub. L. 102–550, set out as a note under section 191 of this title. § 4403. Bilateral netting (a) General rule 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 obli- gations and the covered contractual payment entitlements between any 2 financial institu- tions shall be terminated, liquidated, acceler- ated, 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) Limitation on obligation to make payment The only obligation, if any, of a financial in- stitution to make payment with respect to cov- ered contractual payment obligations to an- other financial institution shall be equal to its net obligation to such other financial institu- tion, and no such obligation shall exist if there is no net obligation. (c) Limitation on right to receive payment The only right, if any, of a financial institu- tion to receive payments with respect to covered contractual payment entitlements from another financial institution shall be equal to its net en- titlement with respect to such other financial institution, and no such right shall exist if there is no net entitlement. (d) Payment of net entitlement of failed financial institution The net entitlement of any failed financial in- stitution, if any, shall be paid to the failed fi- nancial institution in accordance with, and sub- ject to the conditions of, the applicable netting contract. (e) Effectiveness notwithstanding status as fi- nancial institution This section shall be given effect notwith- standing that a financial institution is a failed financial institution. (f) Enforceability of security agreements The provisions of any security agreement or arrangement or other credit enhancement re- lated to one or more netting contracts between any 2 financial institutions shall be enforceable in accordance with their terms (except as pro- vided 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). (Pub. L. 102–242, title IV, § 403, Dec. 19, 1991, 105 Stat. 2374; Pub. L. 109–8, title IX, § 906(b), Apr. 20, 2005, 119 Stat. 168; Pub. L. 109–390, § 4(a), Dec. 12, 2006, 120 Stat. 2695; Pub. L. 111–203, title II, § 211(c), July 21, 2010, 124 Stat. 1514.) 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 ‘‘para- graphs (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 ‘‘para- graphs (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 sub- sec. (a) and struck out heading and text of former sub- sec. (a). Text read as follows: ‘‘Notwithstanding any other provision of law, the covered contractual pay- ment obligations and the covered contractual payment entitlements between any 2 financial institutions shall be netted in accordance with, and subject to the condi- tions 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 AMENDMENT Amendment 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 AMENDMENT Amendment by Pub. L. 109–390 not applicable to any cases commenced under Title 11, Bankruptcy, or to ap- pointments made under any Federal or State law, be- fore 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 AMENDMENT Amendment 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 ef- fective date, except as otherwise provided, see section 1501 of Pub. L. 109–8, set out as a note under section 101 of Title 11. Page 1636 TITLE 12—BANKS AND BANKING § 4404 § 4404. Clearing organization netting (a) General rule Notwithstanding any other provision of State or Federal law (other than section 1821(e) of this title, section 1787(c) of this title, and any order authorized under section 78eee(b)(2) of title 15), the covered contractual payment obligations and the covered contractual payment entitle- ments of a member of a clearing organization to and from all other members of a clearing organi- zation shall be terminated, liquidated, acceler- ated, and netted in accordance with and subject to the conditions of any applicable netting con- tract (except as provided in section 561(b)(2) of title 11). (b) Limitation of obligation to make payment The only obligation, if any, of a member of a clearing organization to make payment with re- spect to covered contractual payment obliga- tions arising under a single netting contract to any other member of a clearing organization shall be equal to its net obligation arising under that netting contract, and no such obligation shall exist if there is no net obligation. (c) Limitation on right to receive payment The only right, if any, of a member of a clear- ing organization to receive payment with re- spect to a covered contractual payment entitle- ment arising under a single netting contract from other members of a clearing organization shall be equal to its net entitlement arising under that netting contract, and no such right shall exist if there is no net entitlement. (d) Entitlement of failed members The net entitlement, if any, of any failed member of a clearing organization shall be paid to the failed member in accordance with, and subject to the conditions of, the applicable net- ting contract. (e) Obligations of failed members The net obligation, if any, of any failed mem- ber of a clearing organization shall be deter- mined in accordance with, and subject to the conditions of, the applicable netting contract. (f) Limitation on claims for entitlement A failed member of a clearing organization shall have no recognizable claim against any member of a clearing organization for any amount based on such covered contractual pay- ment entitlements other than its net entitle- ment. (g) Effectiveness notwithstanding status as mem- ber This section shall be given effect notwith- standing that a member is a failed member. (h) Enforceability of security agreements The provisions of any security agreement or arrangement or other credit enhancement re- lated to one or more netting contracts between any 2 members of a clearing organization 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 other- wise 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). (Pub. L. 102–242, title IV, § 404, Dec. 19, 1991, 105 Stat. 2374; Pub. L. 109–8, title IX, § 906(c), Apr. 20, 2005, 119 Stat. 168; Pub. L. 109–390, § 4(b), Dec. 12, 2006, 120 Stat. 2695.) Editorial Notes AMENDMENTS 2006—Subsec. (a). Pub. L. 109–390 struck out ‘‘para- graphs (8)(E), (8)(F), and (10)(B) of’’ before ‘‘section 1821(e)’’ and ‘‘section 1787(c)’’ and inserted ‘‘terminated, liquidated, accelerated, and’’ after ‘‘organization shall be’’. Subsec. (h). Pub. L. 109–390, § 4(b)(1), struck out ‘‘para- graphs (8)(E), (8)(F), and (10)(B) of’’ before ‘‘section 1821(e)’’ and ‘‘section 1787(c)’’. 2005—Subsec. (a). Pub. L. 109–8, § 906(c)(1), added sub- sec. (a) and struck out heading and text of former sub- sec. (a). Text read as follows: ‘‘Notwithstanding any other provision of law, the covered contractual pay- ment obligations and covered contractual payment en- titlements of a member of a clearing organization to and from all other members of a clearing organization shall be netted in accordance with and subject to the conditions of any applicable netting contract.’’ Subsec. (h). Pub. L. 109–8, § 906(c)(2), added subsec. (h). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2006 AMENDMENT Amendment by Pub. L. 109–390 not applicable to any cases commenced under Title 11, Bankruptcy, or to ap- pointments made under any Federal or State law, be- fore Dec. 12, 2006, see section 7 of Pub. L. 109–390, set out as a note under section 101 of Title 11, Bankruptcy. EFFECTIVE DATE OF 2005 AMENDMENT Amendment 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 ef- fective date, except as otherwise provided, see section 1501 of Pub. L. 109–8, set out as a note under section 101 of Title 11. § 4405. Preemption No stay, injunction, avoidance, moratorium, or similar proceeding or order, whether issued or granted by a court, administrative agency, or otherwise, shall limit or delay application of otherwise enforceable netting contracts in ac- cordance with sections 4403 and 4404 of this title. (Pub. L. 102–242, title IV, § 405, Dec. 19, 1991, 105 Stat. 2375.) § 4406. Relationship to other payments systems This chapter shall have no effect by implica- tion or otherwise on the validity or legal en- forceability of a netting arrangement of any payment system which is not subject to this chapter. (Pub. L. 102–242, title IV, § 406, Dec. 19, 1991, 105 Stat. 2375.) § 4406a. Treatment of contracts with uninsured national banks, uninsured Federal branches and agencies, certain uninsured State mem- ber banks, and Edge Act corporations (a) In general Notwithstanding any other provision of law, paragraphs (8), (9), (10), and (11) of section 11(e) of the Federal Deposit Insurance Act [12 U.S.C. 1821(e)] shall apply to an uninsured national