Paul Wolfowitz's tenure as president of the World Bank was today increasingly under threat, after the bank's powerful governing body indicated that he broke their ethical guidelines in awarding pay increases to his partner.

The statement by the bank's board leaves Mr Wolfowitz vulnerable to disciplinary action, especially if the bank president is found to have lied about his handling of the affair. The news comes just a day after World Bank staff called on him to resign over the matter.

In a statement released this morning, the board said its investigation found that Mr Wolfowitz had approved promotions and pay increases for Shaha Riza - a World Bank staff member with whom he was romantically involved - without a review or decision by the bank's ethics committee or board of directors.

That contradicts an earlier statement by Mr Wolfowitz's office which claimed: "All arrangements concerning Shaha Riza were made at the direction of the bank's board of directors."

But the board, made up of the 24 executive directors, said today: "The ethics committee, including its chairman, had not been involved in the discussions with the concerned staff member. Neither did it find that the terms and conditions of the agreement had been commented on, reviewed or approved by the ethics committee, its chairman or the board," the board said.

It pledged "expeditiously to reach a conclusion on possible actions to take. In their consideration of the matter the executive directors will focus on all relevant governance implications for the bank."

The board also released documents and findings of an internal team that investigated the contract agreed with Ms Riza, including memos and letters between Mr Wolfowitz, the board and bank officials.

The bank has clear rules forbidding partners or those in a relationship from working together. After Mr Wolfowitz's appointment in mid-2005 Ms Riza was seconded to the US state department, along with a promotion and substantial pay rise -from $132,660 to $193,590, tax free - now known to have been personally ordered by Mr Wolfowitz.

The affair is a huge embarrassment for the bank and Mr Wolfowitz, especially given his desire for a tough stance against corruption and rewards for good governance. Critics say that Mr Wolfowitz's own actions have now made a mockery of those aims.

With the world's finance ministers arriving in Washington for a series of scheduled meetings there may be more developments over the weekend.

Gordon Brown, Britain's chancellor, this morning refused to comment on Mr Wolfowitz's position when questioned by journalists. Yesterday the bank president was given the backing of the Bush administration - in which he previously served as deputy defence secretary, and was a key architect of the invasion of Iraq - but the US Treasury was far less enthusiastic, saying: "There is a mechanism in place."

The latest blow for Mr Wolfowitz came the day after he was heckled and booed by staff members - with some chanting, "Resign, resign" - at the bank's headquarters as he attempted to address them.

Mr Wolfowitz's sagging popularity was reinforced in a call by the bank's staff association - representing the majority of the bank's 7,000 employees based in Washington - for him to "act honorably and resign" over the saga, saying it was "impossible for the institution to move forward with any sense of purpose under the present leadership".

Alison Cave, the head of the staff association, said: "The president must acknowledge that his conduct has compromised the integrity and effectiveness of the World Bank and has destroyed the staff's trust."

In a strongly worded editorial, the Financial Times also told Mr Wolfowitz to stand down. Calling the controversy "lethal" to the bank's credibility, the paper's leader column said: "In the interests of the bank itself, he should resign. If he does not, the board must ask him to go."

During a highly charged press conference in Washington on Thursday, Mr Wolfowitz apologised for becoming involved in his girlfriend's compensation, but denied that he had done so voluntarily or for personal reasons. "In hindsight, I wish I had trusted my original instincts and kept myself out of the negotiations," he said.

Mr Wolfowitz's fate now lies in the hands of the bank's executive board members, each representing the World Bank's major donor nations, ranked by shares reflecting the importance of their stake.

The bank's regulations allow the president to be dismissed by a simple majority of votes by shareholders - the US being the largest with 16% of shares.

So far, individual countries have not voiced any public support for Mr Wolfowitz, with executive board members awaiting instructions from their country's finance ministers.