Barclays Bank is upping Bob Diamond to chief executive. Photo credit: Dominic Alves

Diamond Bob moves out of the rough.

American-born investment banker Bob Diamond’s bouncebackability – from the “unacceptable face” of banking to the next chief executive of Barclays – has delighted and appalled in pretty much equal measure.

Diamond, the UK’s highest-paid investment banker, won plaudits for his stewardship of Barclays Capital and for acquiring the US operation of Lehman Brothers shortly after it collapsed two years ago.

“Mr Diamond, who built up Barclays Capital more or less from scratch, no doubt deserves his prize,” opined The Financial Times’ John Gapper who still marvelled that “the hegemony of investment bankers is breathtaking.” Gapper argued, “given that the retail banking sides of universal banks were relatively blameless during the crisis. You might have thought that the retail bankers would have reasserted control over the highly-rewarded risk-takers.” But it has not turned out that way. Gapper noted that investment bankers head three of the biggest European banks with global reach – Deutche Bank, UBS, Credit Suisse – and the number will rise to four when Diamond replaces John Varley as Barclays chief executive in May 2011.

City analysts quizzed by The Guardian welcomed the news of Diamond’s leap up the Barclays food chain. “This is such good news for the UK banking sector,” said David Buik of BGC Partners. “It will send a strong message out to government and to Sir John Vickers’s independent banking commission that the banking sector in the UK is strong, robust and in no mood to surrender its sovereignty to either bureaucrats or politicians.” “Bob Diamond is highly respected in the industry, with an exceptional track record at Barclays Capital, developing it into a top-tier global franchise over the past 14 years,” commented Danny Clarke of Shore Capital.

Peter Mandelson branded Bob Diamond the “unacceptable face” of banking and that’s a position still firmly held by union leaders. “This is about as insulting and divisive as it gets,” bellowed Paul Kenny, GMB General Secretary. “A person who poured petrol on the flames of the fires in the financial system has been rewarded rather than been punished for what he did. Meanwhile GMB members are enduring pay freezes and face job cuts to make good the damage Diamond caused.”

Prominent BBC commentator Robert Peston argued, “Even if Barclays Capital has a record of winning far more often than it loses, it sticks in the craw for many that the huge bonuses earned by Mr Diamond and his colleagues are arguably generated to an extent thanks to the state safety net.” The appointment of Diamond means Barclay’s course is now firmly set argued Peston: “One uncertainty has been cleared up by the appointment of Mr Diamond, the living, breathing, Chelsea-supporting epitome of the modern investment banker: if there were a scintilla of doubt about how Barclays sees its future, it’s clear that (left to its own devices) Barclays would grow and grow as a universal bank, with the bonus-culture of investment banking increasingly dominant.”

In a big day for the UK banking industry, it is also widely reported that Stephen Green, respected chairman of HSBC, is expected to stand down to become trade minister, ending David Cameron’s long search to find a high-profile business figure to fill the role.