Diamond faces grilling in parliament after Barclays exit

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Bob Diamond faced tough questions from British lawmakers on Wednesday, the day after he quit as Barclays chief executive and a bank rate-rigging scandal claimed a third top-level scalp.

Lawmakers are likely to probe issues including whether the Bank of England (BoE) was implicated in the manipulation of Libor - the London Interbank Offer Rate at which banks offer to lend money to each other.

Diamond, 60, stepped down from the top job on Tuesday over revelations that Barclays traders tried to manipulate interbank lending rates.

Barclays chief operating officer Jerry del Missier also resigned Tuesday over the affair, which claimed the job of the bank's chairman Marcus Agius on Monday and may implicate other international banks.

Diamond's appearance before parliament's Treasury Select Committee from 13:00 GMT was likely to last several hours.

On Tuesday, Barclays released Diamond's account of a telephone call he had with Paul Tucker, the deputy governor of the BoE, in 2008.

According to Diamond's summary of the call, Tucker expressed concerns that Barclays' Libor submissions were "towards the top end of Libor pricing."

"Tucker stated... that it did not always need to be the case that we appeared as high as we have recently," Diamond wrote in the note.

Barclays says del Missier interpreted the phone call as an instruction from the BoE to manipulate the rate, though Diamond did not.

Tucker on Wednesday requested to appear before the Treasury Select Committee as soon as possible to give his own version of events.

"Mr Tucker is keen to give evidence to the committee in order to clarify the position with regard to the events involving the Bank of England, including the telephone conversation with Bob Diamond," the BoE said in a statement.

Prime Minister David Cameron on Wednesday branded the rate-fixing scandal "appalling" and added his voice to a growing chorus of politicians urging Barclays not to give Diamond a generous severance package.

"This banking scandal is appalling," Cameron told lawmakers at his weekly question and answer session in parliament.

"It is outrageous, frankly, that homeowners may have paid higher mortgage rates and small businesses may have paid higher interest rates, because of spivvy and probably illegal activity."

He also said it would be "wrong" for those quitting due to the scandal "were given some vast payoff."

Diamond was one of the world's highest paid bankers, earning a package worth £17.7 million (22 million euros, $27.7 million) last year.

Barclays said Tuesday that his severance package was 'still under discussion' but Sky News reported that he will be asked to give up nearly £20 million in shares promised to him in previous years but not yet awarded.

The bank was last week fined £290 million ($455 million, 360 million euros) by British and US regulators for attempted rigging of the Libor and Euribor interest rates.

Libor is a flagship London instrument used throughout the world, while Euribor is the eurozone equivalent. The rates play a key role in global markets, affecting what banks, businesses and individuals pay to borrow money.

Manipulating the rate could have given the impression that the bank was in a stronger position financially than it actually was.

Agius is staying on in his job to lead the search for Barclays' new chief executive, while Diamond and Missier have resigned with immediate effect.

Explaining his decision to quit after 18 months in the top post, Diamond said in a statement: "The external pressure placed on Barclays has reached a level that risks damaging the franchise -- I cannot let that happen."

Raising suspicions of possible wider rigging, it emerged at the weekend that bailed-out Royal Bank of Scotland had sacked four traders over their alleged involvement in a similar affair.

Britain's Serious Fraud Office on Monday announced that it was considering whether to bring criminal prosecutions over the issue, while Cameron has announced a parliamentary inquiry into the scandal.

Lawmakers will vote Thursday on whether to back calls from the main opposition Labour party to set up a judge-led inquiry similar to the press ethics probe triggered by phone-hacking at Rupert Murdoch's media empire.