(This note is not part of the instrument and does not purport to be a legal interpretation.)

The Statutory Instrument gives effect to Directive 2002/47/EC of 6 June 2002 which deals with financial collateral arrangements and the provision of financial collateral. The Statutory Instrument also includes necessary revisions required by Directive 2009/44/EC of the European Parliament and of the Council of 6 May 2009 amending Directive 98/26/EC on settlement finality in payment and securities settlement systems and Directive 2002/47/EC on financial collateral arrangements as regards linked systems and credit claims, specifically in relation to the treatment of night-time settlement and the development of links between settlement systems. The amendments are designed to ensure that the protections offered by the Directive remain adequate in light of market changes.

The aim of the Directive is to create a Community-wide regime for the provision of financial instruments (mainly securities) and cash (not banknotes, but rather money credited to an account) as collateral and where possession or control of the collateral passes to the collateral taker. The regime applies to both title transfer financial collateral arrangements (including repurchase agreements or "repos") and security financial collateral arrangements. It does not apply to non-financial forms of collateral, such as real estate, plant and machinery, book debts etc.