World Bank president Paul Wolfowitz will resign at the end of June, the bank's board announced Thursday, following allegations of conflict of interest over a big raise he arranged for his girlfriend.

"Now it is necessary to find a way to move forward," Wolfowitz said in a statement. "To do that, I have concluded that it is in the best interests of those whom this institution serves for that mission to be carried forward under new leadership."

Wolfowitz's resignation is effective June 30.

Pressure on Wolfowitz to resign had increased since the May 14 release of a report from a special bank panel that found Wolfowitz broke the institution's rules when he arranged the pay raise for his girlfriend Shaha Riza.

In a statement Thursday, the board said it accepted Wolfowitz's assurances that he acted "ethically and in good faith in what he believed were the best interests of the institution."

The board also said it was clear that a number of people had erred in reviewing the pay package.

"It is clear from this material that a number of mistakes were made by a number of individuals in handling the matter under consideration, and that the bank's systems did not prove robust to the strain under which they were placed."

The board, which made no mention of any financial arrangements related to Wolfowitz's departure, said it would review the World Bank's ethics policies.

Several European countries, including France, Germany and the Netherlands, had been pushing for Wolfowitz's resignation.

Wolfowitz and his attorney had been negotiating for his exit. Wolfowitz was said to want the bank to acknowledge some responsibility in the affair, and his lawyer, Robert Bennett, had said his client wouldn't leave with a cloud hanging over his head.

When Wolfowitz took command of the bank in June 2005, his girlfriend, bank employee Shaha Riza, was moved to the U.S. State Department to avoid the appearance of a conflict of interest, although she stayed on the World Bank payroll. Her salary went to $180,000 US from about $133,000 US. It later grew to $193,590 after further raises.

Traditionally, the World Bank has been run by an American. The U.S. is the bank's largest shareholder. The White House said it would have a new candidate to announce soon.

After weeks of supporting Wolfowitz, U.S. President George W. Bush seemed to acknowledge Thursday that the future of the man he had picked for the job was in serious doubt.

"I regret it has come to this," Bush told reporters during a press conference in Washington earlier in the day.

With files from the Associated Press