"Initially I was surprised by that commentary,"Dr Henry told Sales of the criticism."Quite surprised. And I was upset by it. The more I thought about it ... I can't tell you how many times I've relived that appearance,I understand the criticism.

"I really should have performed quite differently. I should have been much more open."

He told media he was"sad to be leaving NAB"under the current circumstances,"but it's absolutely the right thing to do,it gives NAB the opportunity to reset".

Despite NAB's board backing Mr Thorburn earlier this week,the CEO said he had been speaking with Dr Henry,and decided to resign because of a realisation the bank had"fallen short".

He referred specifically to a page in the royal commission's final report that said commissioner Hayne was"not as confident as I would wish to be that the lessons of the past have been learned."

“I have always sought to act in the best interests of the bank and customers and I know that I have always acted with integrity,"Mr Thorburn said.

"However,I recognise there is a desire for change. As a result,I spoke with the board and offered to step down as CEO,and they have accepted my offer."

It is highly unusual for a bank chairman and chief executive to leave at the same time,and Mr Chronican said it would have been"massively disruptive"for Dr Henry to leave earlier.

Mr Chronican said it had been an"extraordinarily difficult week for everyone involved",but the board would now launch a global search for a chief executive.

Former NSW premier Mike Baird,a senior NAB executive,is seen as a leading internal candidate to succeed Mr Thorburn,although there may be pressure on the bank to bring in an external CEO. There is also set to be renewal of the bank’s board,something that has occurred at other scandal-plagued financial institutions.

Earlier this week,Mr Thorburn cancelled plans to take long service leave to deal with the fallout from the royal commission,and on Tuesday said he had the full support of the board.

Separately,Sydney Morning Herald andThe Age reports on Thursday about suspected large-scale fraud by Mr Thorburn's former chief of staff,in which insiders described a culture of largesse and extravagant spending in his office,put his executive oversight in question.

Asked about the scandal,Mr Thorburn said the bank had co-operated with the police and that his pay was cut last year in response,adding"no one in the bank,including myself,is being investigated"by the NSW police.

NAB's latest annual report said Mr Thorburn could be eligible for a termination payment of $1.05 million. A spokesman said this was yet to be finalised.

Mr Chronican,62,spent more than three decades in banking,most recently as the chief executive of ANZ Bank's Australian business,a role he left three years ago. Before ANZ,he was a former chief financial officer of Westpac and head of its institutional division.

When Dr Henry was asked if customers should take their business elsewhere,he replied:"Of course they shouldn’t. We are building the best bank in Australia and one of the best banks globally."

Dr Henry said the board should have the opportunity to appoint a new chairman as it tries to"reset"its culture.

"I am enormously proud of what the bank has achieved and equally disappointed about what the royal commission has brought to light in areas where we have not met customer expectations. Andrew and I are deeply sorry for this,"he said.

Mr Chronican backed the bank's existing strategy to focus more on customers and regaining their trust.

"I recognise the important responsibility in stepping into this role at a difficult time for NAB,” he said.

I'm sad to be leaving NAB in these circumstances,but it's absolutely the right thing to do,it gives NAB the opportunity to reset.

Ken Henry

The bank also released its first quarter profit result on Thursday,a day earlier than scheduled,showing a 3 per cent dip in cash earnings to $1.65 billion.

The leadership upheaval comes after NAB suffered a horror year in 2018,with the royal commissionexposing the fees for no service scandal,questions over alleged rorts by Mr Thorburn's chief of staff,a bribery ring in the bank's mortgage business and a record-breaking shareholder revolt against the bank's executive pay report.

Opposition Leader Bill Shorten said the resignation's would not assuage public anger at the banks and pledged to push for an accelerated response to the commission's 76 final recommendations.

"For Australians sitting at home tonight that have been victims of banking industry misconduct this news will be little comfort,"he said.

"They don’t want to just see a couple of bankers kissed goodbye with golden handshakes. They want real change to cut the rot out of our banks.

"Australians have a choice for the upcoming election. Only Labor can be trusted to clean up the banks. The Liberals will do nothing more than look after their mates at the top end of town."

Vas Kolesnikoff,head of Australia and New Zealand Research for Institutional Shareholder Services,said rest of the board should consider their positions.

"The other board directors should take a hard look at themselves,"Mr Kolesnikoff said.

"You have to credit to Thorburn and Henry in that they resigned. There are other people including in management who have tarnished the bank."

Governance expert Dean Paatsch,who is chief executive of proxy advisory house Ownership Matters,said the resignations were inevitable."It's an example of governance working as it should,"Mr Paatsch said.

"It was excruciating to watch over the past few days but the right decision was made for them by the board."

with Nick Bonyhady