Diamond steps up from his role as head of Barclays Capital, the bank’s investment and wealth management business.
Varley, who became CEO in 2004, will step down from his role and the Barclays’ board on 31 March next year.
Barclays says in a statement that he will stay on until 30 September to “become a senior advisor on regulatory matters” to Diamond and the Board.
Diamond’s appointment will reinforce the view of many that Barclays sees its future as an investment bank.
He has been credited with building Barclays into a major investment bank since he joined the bank in 1996.
Diamond’s lack of retail banking experience could concern Government ministers such as Business Secretary Vince Cable, who has put banks under pressure to help small businesses by easing lending policies.
Diamond says: “As a leading global universal bank, Barclays has the right model, the right strategy, and above all the right people to deliver for all our stakeholders. We face the future with confidence.”
Varley steered Barclays through the financial crisis, choosing not to follow Royal Bank of Scotland and Lloyds Banking Group by taking state aid.
He has recently overseen the realignment of Barclays Corporate from being part of the retail banking arm into the new Corporate and Investment Banking and Wealth Management division alongside Barclays Capital and Barclays Wealth.
He also managed the creation of the Global Retail Banking division, which includes the Barclaycard business.
Separately, it is understood that Stephen Green, chairman of HSBC, is to step down to become the Coalition Government’s trade minister with an announcement due in the next 48 hours.