Barclays (NYSE:BCS) said Monday its CEO John Varley will be stepping down early next year, making way for investment banking head Robert Diamond to take the executive reins of the British bank.

The rise of Diamond, who currently heads the Barclays Capital division, comes after the executive greatly expanded Barclays’ investment banking operations by purchasing the bankrupt but profitable assets of Lehman Brothers in late 2008.

While Lehman did sink into Chapter 11 and the aftermath did cause massive disruptions in the credit markets, Barclays was able to pick up large segments of Lehman at minimal cost.

“What [Diamond] has accomplished in his various roles at Barclays demonstrates clearly that he is a great banker and leader, and an outstanding business builder,” said Varley in a statement. “I know that Barclays will flourish under his stewardship.”

According to the company, Diamond will receive an annual salary of 1.35 million British pounds with an incentive program that could increase his award by 250%. He could also receive a performance-based stock award worth 500% of his base salary as well, the company said.

Varley, who had been with Barclays since 1982, will exit his position on March 31, 2011 and will remain on the bank’s board of directors through the end of September 2011.

Barclays shares sank 5.7% on the news to $19.16 on Tuesday.