NAB says it will set aside an additional $1.2bn to compensate victims of shoddy financial advice provided by planners linked to the bank and people to whom it sold junk insurance.

The new costs, announced to the stock exchange on Wednesday, bring NAB’s total provisions for remediation to more than $2bn and will increase the pressure on other banks to step up their programs.

Costs have ballooned because the bank has discovered that the amount it has to refund customers for behaviour dating back as far as a decade is higher than it first expected.

The headline figure includes both compensation for customers and the cost of running the remediation schemes.

NAB bore the brunt of much of the fallout from last year’s banking royal commission, which followed years of scandals involving customers being systematically dudded by the finance sector.

The bank’s chief executive, Andrew Thorburn, and it chairman, former Treasury secretary Ken Henry, both resigned after they were criticised by commissioner Kenneth Hayne in his final report in February.

By taking the $2bn hit all at once, new chief executive Philip Chronican is now trying to put the bank’s torrid history behind it and draw a clear distinction between his regime and that of his predecessor.

“NAB is moving forward with rigour and discipline to make things right for customers,” Chronican said.

“We understand that shareholders will be rightly disappointed. However, we also recognise the need to prioritise dealing with these past issues and fixing them for customers.”

NAB now expects it will have to refund customers who were damaged by so-called “aligned advisers”, who ran their own businesses giving advice but used the bank’s financial services license, more than half of the $13bn that was paid in fees since 2009.

It said it would also have to increase refunds to customers of advisers who worked directly to the bank to almost 40% of what they paid.

And it also needed to increase remediation to people who bought consumer credit insurance, which is supposed to cover repayments of credit card, home loans or personal loans when the borrower falls ill, loses their job or dies but is often completely worthless.

NAB also said it would take an additional hit of $350m after revaluing its computer software.

The bank’s shares were down 2.8%, to $28.87, shortly before midday on Wednesday.