His defence of the combined retail and investment bank was seen as a response to the increasing debate, following the abrupt departure of NatWest Market's chief executive, Martin Owen, about the wisdom of high street banks lavishing capital on their relatively volatile merchant banking operations.
Speaking to an audience of bankers, he dismissed concerns that medium- sized investment banks such as NatWest Markets and BZW were unable to compete seriously with their well-capitalised American rivals.
He said he believed the approach of European Monetary Union would lead to a "free for all" in which banks that had dominated their domestic markets battled for a share of the new "Euro scene".
That uncertainty would help UK and European banks undo the Americans' hegemony.
Listing the attributes needed to be a global investment banking player, he cited balance sheet strength and the ability to deliver a variety of solutions. Both of those could only be provided by fully integrated groups, he said, combining commercial and investment banking expertise.
Mr Diamond's comments came as Lord Alexander, chairman of NatWest, wrote to the bank's largest institutional investors, offering to meet with them to explain the bank's strategy.
Both NatWest and Barclays have come under increasing pressure from their shareholders to improve the returns from their investment banking arms.
In what appeared to be an oblique reference to the troubles at NatWest, Mr Diamond said that in order to succeed an investment bank needed the highest quality senior management. He said BZW had the "leadership and vision" to attract the best people, the very attributes Derek Wanless, NatWest's chief executive, said were lacking from NatWest Markets.
Following the resignation of Mr Owen on Monday, NatWest is looking for a new chief executive. It expects to make an appointment within six months and, in the meantime, Mr Wanless has taken control of the investment banking operation. The bank is also expected to shortly appoint a new finance director for NatWest Markets.
Mr Diamond said the onset of EMU would be seen as a watershed that allowed the UK banks to put their stamp on the markets. The unification of Europe's financial markets would produce the largest capital pool in the world and mean that being global was finally more than being American.