Barclays chief executive Bob Diamond has resigned with immediate effect in the wake of the rate-rigging scandal.
Barclays, one of the biggest British banks, has faced fierce criticism since it admitted trying to rig a key lending rate.
The bank was fined £290 million by British and United States regulators for manipulating the Libor, the rate at which banks lend to each other, PA reports.
Mr Diamond, an American banker has faced mounting calls to step down, said on Tuesday: "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."
Mr Diamond, once dubbed the "unacceptable face of banking" by Lord Mandelson, showed no sign of stepping down on Monday as he pledged to see an internal review into Barclays' practices through to implementation.
The 60-year-old, who joined the bank 16 years ago, said: "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."
Chairman Marcus Agius, who announced his intention to resign over the affair on Monday, will lead the search for a new chief executive immediately, Barclays said.
Mr Agius said he had to acknowledge responsibility for the devastating blow to the bank's reputation. "The buck stops with me."
Bob Diamond confirmed he would still appear before the Treasury Select Committee on Wednesday to answer questions over the rate-fixing allegations which ultimately led to the British government
launching a parliamentary probe into banking culture.
Evidence will be taken under oath and the committee will have full access to papers and officials and ministers.
The BBC reports Barclays was fined after the Financial Services Authority found its traders had lied about the interest rates other banks were charging it for loans. Investigations are also underway at RBS, HSBC, Citigroup and UBS.
The Financial Services Authority found evidence that Barclays, sometimes working with traders at other banks, tried to manipulate the Libor (London Inter-Bank Offered Rate) and its European equivalent, Euribor, between 2005 and 2009.
Barclays' board has begun an audit of its business practices, which will be conducted by an independent body and will report to new deputy chairman Sir Michael Rake.