Donald MacKenzie, 45, who was named business manager of the year three times by the Royal Bank of Scotland, used his position to create hundreds of false accounts to which he lent millions of pounds. He used some of the money to pay personal bills and even to settle the account of a rugby club where he was treasurer.

At one point MacKenzie, who lived at one of Edinburgh’s most prestigious addresses, had set up more than 1,200 suspected false accounts and was said by police to be operating a “bank within a bank”.

He lent up to £1 million at a time to clients without proper paperwork and then created a maze of false accounts and loans to cover his tracks.

The full extent of MacKenzie’s deception was revealed yesterday when he admitted obtaining loans totalling nearly £21.4 million by fraud. He also admitted stealing £37,170 while employed as a business manager at the bank’s West End branch in Princes Street.

MacKenzie faces a jail sentence of up to six years, and yesterday a judge at the High Court in Edinburgh rejected a defence plea that he be allowed to remain on bail.

Lord Kinclaven told MacKenzie: “I am satisfied that the appropriate course is that you be remanded in custody.”

MacKenzie was arrested in April 2004 after his line manager questioned a transaction of £300,000 and found that it was being paid into a false account. On further examination the bank discovered thousands of suspicious transactions from early 1999 to April 2004.

MacKenzie was found to have £17,320 on him in cash with a further £7,900 in his garage.

Detective Inspector Alan Dickie said that the fraud, believed to be Scotland’s largest, probably started when MacKenzie, in his eagerness to win business, approved a loan to a client without proper paperwork and had to create a false customer account when they failed to make repayments. Using the new account, MacKenzie obtained a further loan with which he serviced the unpaid debt, creating a deception that spiralled out of control.

Mr Dickie said: “He was essentially operating as a bank within a bank because he was carrying out the function of a bank but without the complete knowledge of the Royal Bank of Scotland.”

So complicated was the fraud that it took 16 detectives 16 months to unravel. Of the £21 million, about two thirds has been accounted for through internal payments or has been recouped from MacKenzie’s customers.

Mr MacKenzie, a father of two, had been working at the bank for more than 20 years before his suspension. A co- accused, a 73-year-old businessman and a client of MacKenzie’s, is expected to appear on corruption charges later this year. MacKenzie will be sentenced on June 27.

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