### Question
How does the law define net obligation?


### Answer
Under *12 U.S.C. § 4402*, **net obligation** is defined as:

> the amount by which the covered contractual payment obligations of a financial institution or member exceed the covered contractual payment entitlements of the institution or member after netting under a netting contract

#### Citation:
  - *12 U.S.C. § 4402*
  - Heading: **CHAPTER 45-PAYMENT SYSTEM RISK REDUCTION > SUBCHAPTER I-BILATERAL AND CLEARING ORGANIZATION NETTING**

