Marcus Agius, who anounced his intention to resign as chairman only yesterday, is to take over the running of the bank while a successor to Diamond is found.
The announcement was unexpected in that Mr Diamond had made it clear to staff in a memo 24 hours earlier that he had no intention of falling on his sword - saying it was his responsibility to restore the bank's reputation.
But he said this morning: "The external pressure placed on Barclays has reached a level that risks damaging the franchise.
"I am deeply disappointed that the impression created by the events announced last week about what Barclays and its people stand for could not be further from the truth."
Barclays was fined a record £290m last week for attempting to manipulate the interbank lending rate, Libor, between 2005 and 2009.
Around 12 other lenders in the UK and elsewhere in the world are thought to be also under investigation over the LIBOR rigging scandal.
Diamond came under increasing pressure yesterday as both peers, MP’s, shareholders past and present and the Twiterati all called for his head.
Lord Oakeshott, the Liberal Democrat peer, said: “Marcus Agius going while Bob Diamond stays would be no solution to this scandal. Diamond is the driver and Agius only a passenger in the Barclays car crash.”
Baroness Weathcroft, a Tory peer and former Barclays board member, said: “I think it’s very uncomfortable for both of them. I am not on the board now, so I don’t know how the tenoro of debate is going but I think certainly they must be looking at what’s being said in Parliament, by the Governor of the Bank of England, and wondering whether they can go on like this.”
And Nick Clegg, the Deputy Prime Minister, said: “I'm like everybody else in this in that now that the chairman of Barclays has fallen on his sword and has taken responsibility for what has happened, everybody is asking when are the other senior people at the top of Barclays going to take responsibility for the things that happened on their watch. I don't think it is for politicians to individually hire and fire bankers, but I do think the buck stops at the top.”
