Malaysia's bank chief resigns as corruption probe continues

Malaysia's central bank governor has resigned following allegations that he aided the previous regime in covering debts linked to a financial scandal, said the prime minister on Wednesday.

Muhammad Ibrahim's days were numbered ever since the new government that came to power last month in a shock election victory disclosed the purchase made from Najib Razak's government by Bank Negara Malaysia.

Former leader Razak stands accused of corruption and plundering the state investment fund 1MDB.

Billions of dollars were allegedly stolen from the fund in a sophisticated fraud and used to buy everything from artworks to high-end real estate.

Nearly $700 million has appeared in the ousted leader's personal bank accounts while billions more remain unaccounted for.

Announcing Muhammad's resignation, Prime Minister Mahathir Mohamad said the Harvard-educated banker's replacement had not yet been decided on and the king still needed to give his approval.

Razak's ruling coalition, Barisan Nasional, suffered an election loss after Mahathir Mohamad, a former leader of the BN party came out of retirement and went head-to-head against his protege Najib Razak for the position of prime minister.

While many were expecting an easy victory for Razak's BN coalition - who had held onto power for six decades by controlling the media, government, police and electoral apparatus - Mahathir's surprise return caused what opposition dubbed a "Malay tsunami" and ousted BN from its tight grip on power.

The shock victory only highlighted the depth of disgust and disillusionment the country had with former leader Razak, who had previously denied any wrongdoing and said the money was a donation from the Saudi royal family.