LONDON (AFP) -- Barclays chief executive Bob Diamond has resigned with immediate effect over a rate-rigging scandal at the British banking giant, the company said in a shock announcement on Tuesday.

Although Diamond had faced growing calls to step down, it was thought that he would ride out the storm due to the resignation of Barclays’ chairman Marcus Agius on Monday.

“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.

U.S. 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.”

Diamond’s resignation comes as the bank faced possible criminal prosecution in a scandal that has sullied London’s image as a financial center.

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 also announced a parliamentary inquiry into the revelations that Barclays traders had lied about the interest rates other banks were charging it for loans.

The scandal, which might implicate other international banks, concerns manipulation of the Libor and Euribor rates which play a key role in global markets, affecting what banks, businesses and individuals pay to borrow money.

Barclays last week was fined a total of $455 million by British and U.S. 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.”

Diamond, a high-profile and highly paid banker, 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.

Diamond was meanwhile still due to face questions from British lawmakers on Wednesday over the affair.

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.

On Sunday it emerged that bailed-out Royal Bank of Scotland had sacked four traders over their alleged involvement in the affair, raising suspicions that the practice was widespread.