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The chairman and chief executive of Merrill Lynch has left the firm six days after it reported third-quarter losses of $2.3 billion (£1.1 billion).

Stan O'Neal led the firm's strategy of reliance on financial securities based on the US sub-prime mortgage market, which has suffered heavily during this year's global credit crunch.

Now the 56-year-old, who was appointed head of the company in 2002, has left the company with immediate effect. Alberto Cribiore has been named as his replacement, serving as interim non-executive chairman.

"The company said Mr O'Neal and the board of directors both agreed that a change in leadership would best enable Merrill Lynch to move forward and focus on maintaining the strong operating performance of its businesses", a statement released today said.

On Wednesday the firm announced that its losses in US sub-prime mortgages and collateralised debt obligations amounted to $7.9 billion (£3.8 billion), much greater than the $4.5 billion (£2.2 billion) previously predicted by the company.

Mr O'Neal pledged to shareholders last week that he expected market conditions to remain "uncertain" and said senior figures were working "to resolve the remaining impact".

Now he is exiting with what unconfirmed reports are suggesting is a multi-million dollar payoff.

"I'd like to thank all of my colleagues for their contributions and support of our mission and wish them the successful future they deserve," he said today.