A year later, Diamond struck a deal to buy the North American investment-banking business of bankrupt Lehman Brothers Holdings Inc. for $1.75 billion. He then embarked on a hiring spree to expand the investment banking unit, adding stock underwriting and merger advisory businesses and bankers in Europe and Asia to match its U.S. standing.

"I joined Barclays 16 years ago because I saw an opportunity to build a world-class investment banking business," Diamond said in today's statement. "We built world class businesses together and added our own distinctive chapter to the long and proud history of Barclays."

PPI, Swaps

Diamond was branded the "unacceptable face of banking" by then-Business Secretary Peter Mandelson in 2010 over his compensation. His 12 million-pound remuneration, including a 5.75 million-pound payment toward his personal tax bill last year, made him Britain's top-paid bank CEO. In January 2011 he told Parliamentarians that the time for "remorse and apology" for banks needed to be over, prompting political outcry.

As of Dec. 31, Diamond owned 13.2 million shares in the lender, valued at about 22.5 million pounds, according to the lender's annual report. Under his contract terms he is entitled to 12 months' salary, medical and pension benefits as compensation for loss of office, the report says. His pension contributions and salary were valued at 2.03 million pounds, said the report. A Barclays spokesman declined to immediately comment on his severance package or whether his resignation would qualify as loss of office.

His tenure as CEO has been marred by disputes with regulators, some of which he inherited from his predecessors: the first was over the mis-selling of payment-protection insurance to customers, the second over tax-avoidance plans the Treasury described as "abusive," and the third over improper sales of derivatives to customers.

Shrinking Profit

At the same time, Diamond regularly called on banks to be more "effective citizens."

His departure may stoke speculation the lender may divide its consumer and investment banking operations.

"The problem is the bank is so big," said John Smith, a senior fund manager at Brown Shipley & Co., which manages 2.3 billion pounds including Barclays shares. "It's getting beyond making money for themselves. You're taking risks with the U.K. economy, people's savings, and not just shareholders' capital."

After taking over as CEO in 2011, Diamond vowed to boost Barclays' return on equity, a profitability measure, to 13 percent. The measure stood at 6.6 percent at the end of the year. The stock has sunk more than 30 percent since Diamond took over in January 2011.

Net income for 2011 fell to 3 billion pounds from 3.56 billion pounds in the year-earlier period as investment banking revenue shrank.