---
kind: "section"
citation: "12 U.S.C. § 4403"
title: "12"
title_heading: "Banks and Banking"
number: "4403"
heading: "Bilateral netting"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/12/4403"
units:
  - "Chapter 45 — Payment System Risk Reduction"
  - "Subchapter I — Bilateral and Clearing Organization Netting"
---

# §4403. Bilateral netting

- (a) **General rule—** Notwithstanding any other provision of [State](/usc/12/1707.md?p=d) or Federal law (other than [section 1821(e) of this title](/usc/12/1821.md?p=e), [section 5390(c) of this title](/usc/12/5390.md?p=c), [section 4617 of this title](/usc/12/4617.md), [section 1787(c) of this title](/usc/12/1787.md?p=c), or any order authorized under [section 78eee(b)(2) of title 15](/usc/15/78eee.md?p=b-2)), the [covered contractual payment obligations](/usc/12/4402.md?p=5) and the [covered contractual payment entitlements](/usc/12/4402.md?p=4) between any 2 [financial institutions](/usc/12/4402.md?p=9) shall be terminated, liquidated, accelerated, and netted in accordance with, and subject to the conditions of, the terms of any applicable [netting contract](/usc/12/4402.md?p=14-A) (except as provided in [section 561(b)(2) of title 11](/usc/11/561.md?p=b-2)).
- (b) **Limitation on obligation to make payment—** The only obligation, if any, of a [financial institution](/usc/12/4402.md?p=9) to make [payment](/usc/12/4402.md?p=15) with respect to [covered contractual payment obligations](/usc/12/4402.md?p=5) to another [financial institution](/usc/12/4402.md?p=9) shall be equal to its [net obligation](/usc/12/4402.md?p=13) to such other [financial institution](/usc/12/4402.md?p=9), and no such obligation shall exist if there is no [net obligation](/usc/12/4402.md?p=13).
- (c) **Limitation on right to receive payment—** The only right, if any, of a [financial institution](/usc/12/4402.md?p=9) to receive [payments](/usc/12/4402.md?p=15) with respect to [covered contractual payment entitlements](/usc/12/4402.md?p=4) from another [financial institution](/usc/12/4402.md?p=9) shall be equal to its [net entitlement](/usc/12/4402.md?p=12) with respect to such other [financial institution](/usc/12/4402.md?p=9), and no such right shall exist if there is no [net entitlement](/usc/12/4402.md?p=12).
- (d) **Payment of net entitlement of failed financial institution—** The [net entitlement](/usc/12/4402.md?p=12) of any [failed financial institution](/usc/12/4402.md?p=7), if any, shall be paid to the [failed financial institution](/usc/12/4402.md?p=7) in accordance with, and subject to the conditions of, the applicable [netting contract](/usc/12/4402.md?p=14-A).
- (e) **Effectiveness notwithstanding status as financial institution—** This section shall be given effect notwithstanding that a [financial institution](/usc/12/4402.md?p=9) is a [failed financial institution](/usc/12/4402.md?p=7).
- (f) **Enforceability of security agreements—** The provisions of any security agreement or arrangement or other [credit](/usc/12/5481.md?p=7) enhancement related to one or more [netting contracts](/usc/12/4402.md?p=14-A) between any 2 [financial institutions](/usc/12/4402.md?p=9) shall be enforceable in accordance with their terms (except as provided in [section 561(b)(2) of title 11](/usc/11/561.md?p=b-2)), and shall not be stayed, avoided, or otherwise limited by any [State](/usc/12/1707.md?p=d) or Federal law (other than [section 1821(e) of this title](/usc/12/1821.md?p=e), [section 1787(c) of this title](/usc/12/1787.md?p=c), and [section 78eee(b)(2) of title 15](/usc/15/78eee.md?p=b-2)).

## Source credit

(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.)

## Notes

### 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 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 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 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 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.