The BBC's Rory Cellan-Jones: Resignation hits share prices

The news stunned the City and Barclays' shares plummeted on the stock market. At the end of trading the bank's shares were down 114 pence or nearly 8% at 1,374p, wiping £171m off the value of the company.

Neither Mr Taylor nor Barclays have given any indication as to the reason for his sudden departure.

Barclays says its profits this year will be much lower than expected.

It has been hit by the financial turmoil in Russia and the Far East and now may have to dispose of its remaining investment banking operations.

There are also persistent rumours that it has been considering a merger with another bank - NatWest and Halifax have been mentioned.

Barclays is now the UK's fourth largest bank. It has fallen behind Lloyds TSB and former building societies like the Halifax and Abbey National in terms of profitability.

Deputy chairman takes over

Sir Peter Middleton, the newly appointed deputy chairman, will take over his role until a new chief executive is appointed.

Mr Taylor will leave the group at the end of the year, but will cease being chief executive with immediate effect.

Mr Middleton will then replace Andrew Buxton as chairman once a new chief executive is found.

He was formerly deputy chairman of Barclay Capital, the investment banking arm.

Profits down

In order to reassure the City, Barclays announced its profits forecast for the year to 31 December in advance.

It said it would earn pre-tax profits of at least £1.9bn. That is substantially below City estimates of profits of around £2.2bn.

The new acting chief executive said there were no "black holes" in Barclays accounts.

Barclays has already admitted to substantial losses from its investments in Russia and its dealings with hedge fund Long Term Capital Management.

Mr Middleton said Barclays was reviewing the place of investment banking in its operations.

Barclays was forced to sell the bulk of its investment banking business - BZW - after disappointing results last year.

There is now speculation it will try to sell its remaining unit - Barclays Capital.

Merger rumours

The acting chief executive, Sir Peter Middleton, denied that Martin Taylor had been forced to resign, saying that he had gone "to recharge his batteries."

"I think Martin thought the job was getting more difficult, times were getting harder, he thought the business needed someone with recharged batteries to take the company forward.

"It is essentially like a marriage that comes to an end with both sides on good terms. The relationship had gradually been coming to an end."

He also denied suggestions that Mr Taylor had left after disagreements with the board about a possible merger.

Jennifer Cole of the white collar union Bifu said: "Staff will be feeling quite vulnerable after today's announcement.