NatWest boss Dame Alison Rose has resigned hours after admitting she had made a mistake in speaking about Nigel Farage's relationship with the bank.

She had been heavily criticised for being the source of an inaccurate BBC report about Mr Farage's account at Coutts, which is part of NatWest Group.

The announcement came just hours after NatWest said it had full confidence in her in continuing to lead the bank.

Dame Alison had admitted a "serious error of judgment".

In a statement released early on Wednesday morning, NatWest Group chairman Sir Howard Davies said: "The board and Alison Rose have agreed, by mutual consent, that she will step down as chief executive of the NatWest Group.

"It is a sad moment."

In a separate statement, Dame Alison thanked her colleagues "for all that they [had] done", saying: "I remain immensely proud of the progress the bank has made in supporting people, families and business across the UK, and building the foundations for sustainable growth."

Following her resignation, ex UKIP leader Mr Farage tweeted: "Others must follow. I hope that this serves as a warning to the banking industry.”

Dame Alison had come under mounting pressure from Downing Street, the chancellor and other senior cabinet ministers to resign, with the BBC told there were “significant concerns” over her conduct.

Mr. Farage, the former leader of the UK Independence Party and Brexiteer, first reported in early July that his account had been closed and said he had not been given a reason.

The BBC reported that it was closed because he no longer met the wealth threshold for Coutts, citing a source familiar with the matter. It has since apologised for its inaccurate report.

Mr. Farage subsequently obtained a document looking at his suitability as a Coutts customer.

The 40-page document flagged concerns that he was “xenophobic and racist”, and also questioned the reputational risk of having Mr. Farage as a client. It said that to have Mr. Farage as a customer was not consistent with Coutts' “position as an inclusive organisation” given his “publicly stated views”.

Confidentiality key

City minister Andrew Griffith said it was “right” that Dame Alison had resigned from NatWest, which is 39% owned by the taxpayer.

“This would never have happened if NatWest had not taken it upon itself to withdraw a bank account due to someone's lawful political views. That was and is always unacceptable,” he said.

Freddy Colquhoun, investment director at the wealth management company JM Finn, told 5 Live's Wake up to Money the resignation was inevitable: "I think as soon as you lose the confidence of Downing Street, who is also a major shareholder, then something needs to change quite quickly.

“Confidentiality, it is one of the major pillars of trust between the clients and the bank.”

Dame Alison said she had not revealed any personal financial information about Mr. Farage, but admitted she had left the BBC's business editor Simon Jack “with the impression that the decision to close Mr. Farage's accounts was solely a commercial one.”

She said she was wrong to respond to any question raised by the BBC about the case.

Paul Thwaite, Natwest's current chief executive of its commercial and institutional business, will take over Dame Alison's responsibilities for an initial period of 12 months, pending regulatory approval. (BBC)