NAB CEO Andrew Thorburn will leave his post at the end of February.
It comes just days after the banking royal commission's final report, which made particular criticism of NAB, was made public.
The inquiry delivered a verdict of a greed-driven industry, making 76 recommendations to better protect consumers and improve regulation.
It also referred 24 cases of potentially criminal activity to the responsible regulators for further investigation.
Mr Thorburn says he's sorry for what happened, telling reporters he accepts responsibility for the mistakes made under his care.
"It's clear that we need to get better and that we've fallen short. I'm disappointed about that, I'm sorry about that and I'm accountable for that. It's been an extraordinarily challenging and difficult few days. I feel like I’ve made a difference in this bank. I’m proud of what I’ve done. It’s not been perfect. There’s always going to be mistakes made, and I accept the ones that have been made on my watch."
Chairman Ken Henry will leave the bank when a new CEO is found.
He says leaving now gives NAB the opportunity to hit the reset button.
"I've had to reflect in recent times on our inability as company to meet community expectations and customer expectations. Andrew and I are deeply sorry for our inability to do that. I'm sad to be leaving NAB in these circumstances, but it's absolutely the right thing to do."
Dr Henry says NAB will go on a global search for a new CEO -- one that can deliver what he calls the culture NAB "aspires" to.
He also says his resignation will leave the NAB board stronger.
"In the present circumstances, what NAB needs is a CEO who can deliver the right culture for this business and the culture we aspire to. But I am determined that this board is improved, not diminished, by the events of today."
In the meantime, Phil Chronican, a current NAB Director, has been appointed acting CEO.
He says NAB is committed to changing.
"Obviously it's been an extraordinarily difficult week for everyone involved, and all I can say is, while these issues have weighted heavily on us, we’ve got a big agenda ahead of us. We've got a template for reform in the industry and for the royal commission’s 76 recommendations -- and we have a template for improvement in our own performance."
NAB has consistently underperformed compared to the other major banks, having never recaptured its pre-financial crisis share price highs.
Consumer and advocacy groups have welcomed some of the key recommendations of the banking royal commission.
The commission brought attention to the financial sector's problems and commissioner Kenneth Hayne's 76 recommendations ensure that focus will continue.
Consumer group CHOICE says the Banking Royal Commission Report is an opportunity to clean up the banking and financial services sector.
C-E-O Alan Kirkland says financial institutions have been undermined by decades of industry lobbying, resulting in laws that have failed consumers.
Among a range of wishes, he wants an end to weak self-regulation through industry codes along with an end to hidden fees for financial advice.
"This is a scathing report that calls for drastic changes to the law and that is what it's going to take if we are going to stop consumers from being protected from all of the harms revealed by the Royal Commission. We are really pleased to see the enormous focus on mortgage brokers. The Commission has recommended a complete overhaul of the mortgage broking system so that it works for consumers rather than working for banks which is does at the moment."
Peter Strong is the C-E-O of the Council of Small Business, which had opposed the royal commission.
But he now admits its recommendations will benefit small business and could bring more lenders into the system.
Mr Strong says a stronger focus on regulation by the Australian Prudential Regulation authority, or APRA , and the Australian Securities and Investments Commission, or ASIC should result in cultural change for the sector.
"We will look at the details, but it shows the banking system wasn't broken, we were against the Royal Commission first up but we needed the Royal Commission to show that maybe the system was not broken but some of the attitudes that we have in the senior management of banks was broken. Now we have to fix that. Giving APRA and ASIC more powers and putting more pressure on them to do their job I think is a good outcome."
