Tulip Siddiq has resigned as a Treasury minister after repeated questions about her financial links to the ousted Bangladeshi government run by her aunt.

Siddiq, who was the City and anti-corruption minister, was not found to have broken any rules by Laurie Magnus, the adviser on ministerial standards, over her use of properties given to her and her family.

However, in his advice to Keir Starmer, Magnus said that she could have been more alive to the reputational risks arising from her family’s ties to Bangladesh and suggested the prime minister would want to consider her ongoing responsibilities.

The minister resigned on Tuesday saying that she had fully declared all her financial interests and relationships but it was clear that the situation had become a distraction for the government.

It is the second resignation of a senior woman from Starmer’s government over an ethics issue after Louise Haigh departed as transport secretary last year over a conviction for fraud after wrongly reporting a mobile phone as stolen before she was an MP.

In her letter to Starmer, Siddiq said that she had been keen for the independent adviser to show she had not acted improperly.

“However, it is clear that continuing in my role as economic secretary to the Treasury is likely to be a distraction from the work of the government,” she said.

“My loyalty is and always will be to this Labour government and the programme of national renewal and transformation it has embarked upon. I have therefore decided to resign from my ministerial position. I would like to thank you for the privilege of serving in your government, which I will continue to support in any way I can from the backbenches.

Starmer said he accepted her resignation “with sadness” and hinted at a swift ministerial comeback, saying that the “door remains open for you going forward.” He said that he was clear Magnus had found no breach of the code and no evidence of financial improprieties. “I appreciate that to end ongoing distraction from delivering our agenda to change Britain, you have made a difficult decision.”

Siddiq will be replaced as City minister by Emma Reynolds, a DWP minister, who previously worked for City UK, the financial services industry group. Torsten Bell, a new MP and former chief executive of the Resolution Foundation, will take her position as pensions minister.

Siddiq had earlier this month referred herself to Starmer’s adviser on ministerial standards, after it emerged she had lived in multiple properties associated with people with links to her aunt, Sheikh Hasina, Bangladesh’s ousted leader.

She had been under pressure over her occupancy of several properties, including a two-bedroom flat near King’s Cross in central London, given to her by a person with links to her aunt’s regime. She also lived for three years while an MP in a Hampstead flat given to her sister by another person with links to the former Bangladesh government.