Anglo Irish Bank Chief Executive David Drumm has resigned in the wake of the controversy over inappropriate loans to the bank's chairman.

It follows last night's resignations of Chairman Sean FitzPatrick and Non-Executive Director Lar Bradshaw.

Mr Drumm will step down with immediate effect, however, he will work with the chairman through a transition phase until a new chief executive is appointed.

Minister for Finance Brian Lenihan has welcomed the appointment of accountant Donal O'Connor as the new Chairman of Anglo Irish Bank.

Click here for more on Mr FitzPatrick, including his resignation statement

Mr Lenihan said the development would not interrupt the progress on recapitalising Anglo Irish Bank.

He said the bank remained covered by the Government guarantee so depositors and creditors were assured of the security of funds.

Mr FitzPatrick has also resigned from the boards of a number of other companies including Aer Lingus, Smurfit Kappa and Greencore.

His resignation relates to loans totalling €87m he had from the bank.

Over eight years, he temporarily transferred loans he had with Anglo Irish to another bank.

This had the effect of keeping details out of the public domain when they would normally have been disclosed in the bank's accounts.

The issue came to light following an inspection by the Financial Regulator earlier this year.

The regulator said the practice was not appropriate.

A high-level meeting continued into the night to review how the financial regulator handled the investigation.

In a statement Mr FitzPatrick said what he did was not illegal but acknowledged it was not acceptable.