Dylan Martinez / Reuters, file
Bob Diamond waits to pose for photographs after he was named chief executive of Barclays in September, 2010. Diamond resigned on Tuesday.
LONDON - Bob Diamond, the chief executive of Barclays, resigned early Tuesday over the lending rate-rigging scandal that last week saw the bank fined a record amount by U.S. and U.K. regulators.
The move deepens the latest crisis to hit the financial services industry, with observers suggesting investigations into the manipulation of inter-bank lending rates could soon implicate banks in the United States.
Diamond’s resignation comes a day after the company’s chairman Marcus Agius announced his own departure. Despite also being implicated in the issue, Agius will stay on to lead the search for a replacement chief executive, according a statement early Tuesday.
It came as fresh details about the case showed how Diamond and other senior executives played a role in the affair, according to a story in The New York Times.
In 2007 and 2008, Diamond’s top deputies told employees to report artificially low rates in line with its rivals, deflecting scrutiny about the health of Barclays at the height of the financial crisis, according to several people close to the case, the report said.
Diamond’s statement said he was stepping down because political pressure on Barclays risked "damaging the franchise." Britain’s prime minister on Monday announced a public inquiry, describing the issue as "a scandal."
"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," Diamond said in the statement.
He will still appear before U.K. lawmakers on Wednesday to answer questions about the affair. "I look forward to fulfilling my obligation to contribute to the [U.K.] Treasury Committee's enquiries related to the settlements that Barclays announced last week without my leadership in question," he said.
Barclays is one of a handful of international banks under investigation for rate-rigging misconduct and the first to reach a settlement with regulators.
Last week, regulators in the U.S. and U.K. fined Barclays $450 million for attempting to rig Libor and Euribor, the interest rates at which banks lend to each other and which underpin trillions of pounds worth of financial transactions.
Staff did this over a number of years, trying to raise them for profit and then, during the financial crisis, lowering them to hide the level to which Barclays was under financial stress, according to a BBC report. Britain’s Serious Fraud Office is also considering whether to bring criminal charges, the BBC said.
John Mann, an opposition Labour Party lawmaker and member of parliament's Treasury Committee, told Sky News that Barclays executives were guilty of "arrogance," saying the bank had "systematically defrauded homeowners and customers."
Reuters contributed to this report.