Watanabe announced his resignation at a press conference Thursday in Tokyo, ending his four year leadership of Nomura Holdings Ltd. Takumi Shibata, another top executive at the bank, also resigned.
Watanabe, 59, will from Aug. 1 be replaced by Koji Nagai, the president of Nomura Securities Co., which is part of the Nomura banking empire and at the centre of the insider scandal.
Japan's financial regulators are investigating Nomura Securities for leaking information to clients ahead of planned securities offerings by energy company Inpex, Mizuho Financial Group and Tokyo Electric Power Co. in 2010.
Nomura has admitted that some its employees were involved in leaking inside information.
"Our reputation has been badly damaged," said Nagai. "To try to restore trust is easily said, but to actually accomplish that is a huge undertaking. Rather than just change our approach, we need to fundamentally rebuild the company. All corporate employees need to be involved in this," he said.
A panel of external lawyers commissioned by the company said in a June 29 report that its equity sales staff would seek information from colleagues about upcoming offerings that Nomura was underwriting and then pass along those tips to customers.
The panel made a series of recommendations to prevent such incidents in the future, including banning conversations with clients about rumours regarding financing transactions and using personal cellphones for business.
Nomura is reportedly losing underwriting business in wake of the scandal.
The company is still being investigated by the Securities and Exchange Surveillance Commission and could face penalties.
Nomura's share price has more than halved since word of the investigation first surfaced in March, falling from 417 yen to 259 yen. It was up 5.7 per cent Thursday on reports of Watanabe's resignation.