Pound Declines Versus Euro as RBS Predicts More ‘Impairments’

London - The pound fell against the dollar and the euro after Royal Bank of Scotland Group Plc, the biggest bank controlled by the U.K. government, said impairments will remain at “elevated levels.”

The pound lost 0.4 percent against the euro and 0.2 percent versus the dollar a day after the Bank of England unexpectedly set out plans to extend its asset-purchase program by 50 billion pounds ($84 billion), citing the nation’s fragile recovery. Gilts gained and the FTSE 350 Index of British banks slid after RBS chief executive officer Stephen Hester said “performance over the next two year” will continue to be “poor.”

“RBS shows that there are still vulnerabilities in the banking system and that works against sterling,” said Daragh Maher, deputy head of global foreign exchange strategy in London at Calyon, the investment-banking arm of Credit Agricole SA. “But had it not been for the Bank of England’s decision yesterday, the market would have been more inclined to overlook RBS, sterling was already on the defensive.”

The pound slid to $1.6748 as of 8:33 a.m. in London, from $1.6783 yesterday. It weakened to 85.79 pence per euro, from 85.49 pence.