SYDNEY (REUTERS) - Australia's Crown Resorts said on Wednesday (Feb 10) that two directors nominated by top shareholder James Packer have resigned, a day after a critical report by an industry regulator deemed the casino giant unsuitable to hold a gambling licence.

The report published on Tuesday found Crown is unfit to hold a gaming licence for its flagship new Sydney resort unless it makes sweeping changes to its board and culture.

Guy Jalland and Michael Johnston, both nominees of Mr Packer's holding company, had resigned, Crown said in a one line statement.

Crown shares plunged as much 8.9 per cent, compared with a slightly higher broader market.

The report followed a year-long inquiry by the New South Wales state gambling watchdog that aired allegations of widespread money laundering and governance failures at Crown.

"They've got a lot of work to do to satisfy us," Philip Crawford, chair of the NSW Independent Liquor and Gaming Authority, told reporters on Wednesday. "We'll have a dialogue with Crown to see what they can do. I hope that they cooperate."

The report, headed by retired judge Patricia Bergin, recommended a 10 per cent limit on any casino shareholdings in the state without specific approval, a move that would effectively force Packer to divest some of his 35 per cent holding in Crown.

Ms Bergin also singled out chief executive Ken Barton as "no match for what is needed."