Stan O'Neal finally bowed to boardroom pressure today and resigned as chairman and chief executive of Merrill Lynch, the Wall Street investment bank and brokerage he had led for just under five years.

Mr O'Neal, who leaves with immediate effect, becomes the most high-profile banking boss to be toppled this year and is by far the biggest casualty of the worldwide credit crunch.

He leaves, with a payoff estimated at about $200 million, after approaching rival bank Wachovia to discuss a possible tie-up without the approval of the Merrill board.

Merrill said Alberto Cribiore, a member of the bank's board since 2003, would become interim non-executive chairman and would lead the search committee charged with finding Mr O'Neal's replacement.

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The formal departure of Mr O'Neal marks the culmination of days of feverish speculation that he was poised to be ousted from the bank having lost the confidence of the board.

Only last week, Merrill was forced to unveil an $8.4 billion writedown that resulted in a third-quarter loss of $2.24 billion, the biggest in its near 100-year history.

Mr Cribiore is a founder and managing partner of Brera Capital, a private equity firm. He was previously president of Clayton Dubilier & Rice, also a private equity group.

Merrill said: "Mr O'Neal and the board of directors both agreed that a change in leadership would best enable Merrill Lynch to move forward and focus on maintaining the strong operating performance of its businesses."

Mr O'Neal, one of the few black men to lead a Wall Street investment bank, said: "I have been very fortunate to spend the past 21 years at Merrill Lynch. The company has provided me with opportunities that I never could have imagined growing up, culminating with my leadership of the company over the past five years."

The bank's shares fell 1.3 per cent to $66.50 in pre-market trading in New York.

Merrill said Mr Cribiore would chair a search committee that would assess candidates from both inside and outside the company.

Laurence Fink, who runs the Merrill-owned investment management firm BlackRock, is seen as a strong internal candidate with John Thain, head of merged stock and derivatives exchange NYSE Euronext, tipped as a powerful external possibility.

Intriguingly two of Mr O'Neal's key lieutenants will remain at the bank, suggesting the board is not preparing a purge of all of its former chief's professional associates.

Ahmass Fakahany and Gregory Fleming will remain as co-presidents and chief operating officers, Merrill said.

Mr Fleming will lead Merrill Lynch businesses, including risk management, while Mr Fakahany will run the global support, finance and human resources units.

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