Barclays bank chief executive Bob Diamond resigned on Tuesday, caving in to political pressure over a rate rigging scandal which may trigger criminal charges and is bringing the City of London into disrepute.
Diamond, high profile and highly paid, faced growing calls to go but it was thought he might save his job and ride out the storm thanks to the resignation of Barclays' chairman Marcus Agius on Monday.
Agius is now expected to step down only after leading the search for a new chief executive to replace Diamond.
The scandal, which might implicate other international banks, concerns manipulation of the Libor and Euribor interest rates.
These benchmark rates play a key role in global markets, affecting what banks, businesses and individuals pay to borrow money. Libor is a flagship London instrument used throughout the world. Euribor is the eurozone equivalent.
"Barclays today announces the resignation of Bob Diamond as chief executive and a director of Barclays with immediate effect," the bank said in a statement to the London Stock Exchange.
US national Diamond added in the statement: "The external pressure placed on Barclays has reached a level that risks damaging the franchise -- I cannot let that happen."
British finance minister George Osborne welcomed Diamond's resignation.
"I think it's the right decision for Barclays. I think it's the right decision for the country. I hope it's a first step towards a new culture of responsibility in British banking," he told BBC radio.
Diamond was still due to face questions from British lawmakers on Wednesday over the affair which could yet sully some other top names in international banking.
Barclays' share price was up 0.45 percent at 169.15 pence following the announcement and in early trading on London's benchmark FTSE 100 index, which rose 0.24 percent overall.
"Despite the void Mr Diamond's departure leaves at one of the UK's largest banks, investors seem to be thinking -- or at least hoping -- that this may draw a line under the issue," said Mike McCudden, head of derivatives at trading consultancy Interactive Investor.
Diamond's resignation comes as the bank faced possible criminal prosecution in a scandal that has sullied London's image as a financial centre.
Britain's Serious Fraud Office on Monday announced that it was considering whether it was "appropriate and possible to bring criminal prosecutions" over the issue, adding that it hoped to reach a conclusion within a month.
British Prime Minister David Cameron has also announced a parliamentary inquiry into the revelations that Barclays traders had lied about the interest rates other banks were charging it for loans.
On Sunday it emerged that bailed-out Royal Bank of Scotland (RBS) had sacked four traders over their alleged involvement in the affair, raising suspicions that the practice was widespread.
Barclays was last week fined a total of £290 million ($455 million, 360 million euros) by British and US regulators for attempted rigging.
On Monday it said it would launch an independent audit that would "undertake a root and branch review of all of the past practices that have been revealed as flawed since the credit crisis started" about five years ago.
The bank insisted that it would establish "a zero tolerance policy for any actions that harm the reputation of the bank."
Agius, who has chaired Barclays for six years, apologised on Monday to its clients and shareholders for a scandal that had "dealt a devastating blow to Barclays' reputation."
Diamond was in charge of Barclays' investment arm at the time of the suspected manipulation.
"I joined Barclays 16 years ago because I saw an opportunity to build a world class investment banking business," Diamond said in Tuesday's statement.
"My motivation has always been to do what I believed to be in the best interests of Barclays. No decision over that period was as hard as the one that I make now to stand down as chief executive," he added.
Markets were also wondering whether the latest banking scandal would result in a radical shake-up of the way in which business is conducted across the City of London financial district, amid pressure from high up the political ladder.
Barclays is the first major financial institution to settle following investigations on both sides of the Atlantic.