Barclays chief executive Bob Diamond resigned with immediate effect today in the wake of the rate-rigging scandal.
The American banker, who has faced mounting calls to step down, said: "The external pressure placed on Barclays has reached a level that risks damaging the franchise."
He added: "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."
ITV News' Political Correspondent Libby Wiener reports:
The move comes after Barclays was fined £290 million by UK and US regulators for manipulating the Libor, the rate at which banks lend to each other.
It was also revealed by insiders at the bank today that Barclays' board held talks with the Bank of England Governor Sir Mervyn King and Financial Services Authority chairman Lord Adair Turner. Both regulators seem to have had a hand in Mr Diamond's exit.
The Chancellor George Osborne welcomed Diamond's "right decision" which he said he had been informed of last night by the bank's chairman, Marcus Agius.
The exodus from Barclays continued this afternoon with the resignation of Chief Operating Officer Jerry del Missier.
Mr del Missier worked closely with Mr Diamond to build up the bank's investment arm Barclays Capital between 2005 and 2008. He was appointed to his current position last month.
Mr Agius, who initially resigned over the affair but has since announced his temporary return to the board, will lead the search for a new chief executive immediately.
Mr Diamond, who was once dubbed the "unacceptable face of banking" by Lord Mandelson, showed no sign of stepping down yesterday as he pledged to see an internal review into Barclays' practices through to implementation.
But in his resignation statement, the 60-year-old, who joined the bank 16 years ago, said:
Read Bob Diamond's full resignation statement here.
Mr Diamond confirmed he would still appear before the Treasury Select Committee tomorrow to answer questions over the rate-fixing allegations which ultimately led to the Government yesterday launching a parliamentary probe into banking culture.
He added: "I leave behind an extraordinarily talented management team that I know is well placed to help the business emerge from this difficult period as one of the leaders in the global banking industry."
Speaking after Mr Diamond's resignation, Chancellor George Osborne said it was "the right decision for Barclays and the country".
Labour leader Ed Miliband welcomed the decision but continued to call for a full judicial inquiry into banking culture.
He said: "This was necessary and right. It was clear Bob Diamond was not the man to lead the change that Barclays needed.
"But this is about more than one man - this is about the culture and practices of the entire banking system, which is why we need an independent, open, judge-led public inquiry."
The Deputy Prime Minister Nick Clegg said: "This was the right decision on his part.
"People will now want us to get on with the inquiry and take further action fast to ensure that people and businesses are protected.
But others have been disappointed by the move.
Ian Gordon, an analyst at Investec said: "We are disappointed by Bob's resignation."
But he added: "That said, it is undeniable that the unrelenting political/media campaign had centred on Bob personally, and this was leading to a persistent misrepresentation of Barclays' position in relation to the multi-bank Libor investigations, and a clear distraction from the execution of Barclays' strategic repositioning.
Sir Richard Branson said:
The Barclays share price has now reversed its falls of earlier this morning, when it dropped around 3% to 163p. Since Bob Diamond's resignation it has jumped to around 171p.
It will provide some relief for investors who have seen the share price drop 37% over the last year and 29% in the last three months.