The chairman of Barclays confirmed today that he is stepping down as the storm over the interest rate fixing scandal led to sackings at another high street bank and political pressure grew for a City-wide criminal investigation.

The departure of Marcus Agius was announced this morning as the embattled bank moved to satisfy political demands for a senior executive to take responsibility for the debacle which has wiped billions off its share price and shaken confidence in Britain's financial institutions.

In his statement this morning, Mr Agius said: he was "truly sorry" and that "the buck stops with me."

The move came after it emerged that the taxpayer-funded Royal Bank of Scotland has sacked four traders over the scam and Vince Cable, the Business Secretary, said he supported a police inquiry into the manipulation of the Libor inter-bank lending rate.

The hardening of government rhetoric – Mr Cable says the Serious Fraud Office is re-examining evidence of rate-fixing – came as Barclays and other banks at the heart of the scandal braced themselves for "BP-style" lawsuits that are likely to cost billions of pounds in compensation.

The Barclays board hopes that the departure of Mr Agius, who had a difficult relationship with shareholders, will relieve some pressure on the bank's embattled chief executive, Bob Diamond.

Mr Agius is due to go before the Treasury Select Committee on Thursday and is expected to appear despite his resignation.

He will be replaced, at least in the interim, by Sir Michael Rake, an experienced City figure who is currently the bank's senior independent director.

His resignation letter is expected to accept that the buck stops with him and to offer an apology to staff, customers and shareholders for the "devastating blow" to the bank's reputation from an "unacceptable standard of behaviour".

Mr Agius earned £750,000 a year for a three-day week and was on 12 months' notice. He also held 232,000 shares, worth £378,000.

Meanwhile, it emerged yesterday that Mr Diamond told City analysts hours after his bank had been hit with a record fine that he was confident the firestorm "will fade".

An email circulated by staff at the investment giant Morgan Stanley following a face-to-face meeting last Thursday showed Mr Diamond to be in a bullish mood, insisting that he had no intention of resigning despite admitting that the exposure of the rate fixing was a "significant blow" and he expected matters would "get worse before better".

Mr Diamond's position remains precarious despite his insistence that he will remain in his post. Patience Wheatcroft, a Conservative peer and a former non-executive director of Barclays, yesterday joined the list of those, including the Labour leader Ed Miliband, who have called for his resignation.

A copy of the memo obtained by The Independent reveals how the bank boss said he feared the scandal would lead to what analysts described as "more political intervention" and that it reinforced the "bad caricature" of the industry. Mr Diamond, who last year called for an end to banker bashing, said he expected pressure on the industry would recede once reforms had been put in place to deal with the question of what to do with banks deemed "too big to fail".

Under the heading "Political and Regulatory Aftershocks", the Morgan Stanley memo based on Mr Diamond's comments said: "[He] fears more political intervention. Thinks political and regulatory pressure will fade as the too-big-to-fail question is addressed… but that is for the longer term and things get worse before better."

The £17m-a-year chief executive also acknowledged that Barclays and other British banks under investigation for rate fixing, including RBS and Lloyds Banking Group, face the prospect of a wave of compensation suits and raised BP, which is facing a total bill of up to £40bn for the Gulf of Mexico oil spill, as "a case in point". A Barclays spokesman said yesterday: "We do not comment on analyst notes."

Mr Diamond will be asked about the size of Barclays' legal liabilities when he appears before MPs on the Commons Treasury Select Committee on Wednesday for what is likely to be an uncomfortable examination of his actions to deal with rate fixing.

It emerged yesterday that the Barclays boss held a conversation in 2008 with Paul Tucker, the Deputy Governor of the Bank of England, about the bank's predictions for Libor, which acts as a benchmark for financial instruments worth £229trn worldwide.

MPs are likely to ask Mr Diamond why, following his telephone call with Mr Tucker, managers of Barclays' investment arm believed the Bank of England had sanctioned the practice of making the bank look stronger than it was by submitting lower interest rates than it was actually paying itself.

The Financial Services Authority, said last week that Barclays and the Bank of England had agreed that the central bank gave no instruction for Barclays to falsify its submissions during the conversation.

The repercussions from the Libor manipulation, which took place between 2005 and at least 2009, and led to Barclays being fined £290m by American and British regulators, extended to a second UK bank for the first time when RBS said it had dismissed four traders over the practice at the end of last year. The sacked men were named last night as Paul White, Neil Danziger, Andrew Hamilton and Tan Chi Min.

Mr Tan, who was sacked for gross misconduct for trying to influence Libor rates, claimed in court papers filed yesterday that the bank had condoned the practice and it was common for senior staff to make rate requests to maximise profits. The bank, which is still struggling to overcome the computer glitch which froze millions of clients out of their accounts, declined to comment on the sackings.

Mr Cable supported a call from Lord Blair, the former Metropolitan Police Commissioner, for a police investigation into what he said appeared to be evidence that Barclays staff had perpetrated a conspiracy to defraud.

David Cameron is also under pressure to widen the terms of a review of the way in which Libor rates are set.

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Polo-playing Sir Michael Rake is a serial chairman of some of Britain's biggest companies who as a young man flunked his professional exams but went on to become the country's highest paid accountant