Image copyright Getty Images Image caption Sir Howard said the bank had "bought some protection"

Royal Bank of Scotland (RBS) acted to protect itself against a plunge in sterling after the European referendum vote, its chairman has said.

Sir Howard Davies told the BBC the bank feared a plummeting pound would make a looming multi-billion dollar US fine more costly.

Sterling fell from $1.50 to a 31-year low against the dollar on the Brexit vote and is now worth $1.29.

RBS is awaiting a fine for its role in the 2007 US housing market collapse.

Sir Howard told the Today programme the bank, which is 73%-owned by the taxpayer, had acted to protect itself in the event the dollar strengthened against the pound.

"I can't tell you for how much, but yes we did notice that, and we bought some protection," he said.

Like several big banks, including Barclays and Deustche Bank, RBS is in talks with US authorities to settle a long-running investigation into its sale of investment bonds based on sub-prime mortgages in the US.

Analysts have speculated that the size of the eventual fine that could be imposed on RBS may be as much as £9bn.

The 10% fall in the exchange rate between sterling and the dollar since the referendum vote means RBS could have saved itself £900m.

'Able to lend'

RBS shares have also plunged sharply since the vote, falling from north of 260p to about 160p.

Sir Howard said the fall in the bank's share price was the result of the bank's direct exposure to the British economy.

"The market thinks there is going to be a slowdown in the UK economy, and if you are a big domestic bank you can't hide from what's going on," he said.

Image copyright Reuters

Sir Howard would not be drawn on whether the government's planned sale of shares in RBS was now on hold but he said it was a "realistic" conclusion to think it would be delayed.

The government had said it wanted to sell part of its stake before the next election.

Last week, RBS's chief executive, Ross McEwan, said a two-year delay was likely.

Sir Howard was one of the bank bosses who yesterday met the Chancellor, George Osborne, to discuss the Brexit vote fallout.

The RBS chairman said the bank was ready and willing to lend.

"Last time (the 2008 crisis and recession) the situation was that demand for credit, but so was supply, because the banks had to build up their reserves. That is not the case this time round. We are not capital-constrained and we are able to lend."