The news that Lloyds Bank has decided that there is no future for it in Ireland and is therefore pulling out and closing down Bank of Scotland Ireland (BoSI) is an ominous warning of the state of banking in the country and a foretaste of further foreign bank withdrawals. At the individual SME level, the closure will mean that upwards of 5,000 businesses are now denied access to new working capital, while 12,000 enterprises will have to find new banks by this December. How many more foreign-owned banks will follow suit? Already NIB and ACC/Rabobank have indicated that they have absolutely no interest in new accounts.

What a change from the heady days, almost 11 years to the day, when Bank of Scotland arrived in Ireland to a fanfare of welcomes, providing a kick in the goolies to the incumbent banks who were forced to reduce their margins on home loans by a staggering 80%.

This exposure of the super profits being made by Irish banks at the time was heralded as a new dawn for commercial banking and businesses waited with bated breath for a similar reduction in business interest rates. Alas it never really happened.

BoSI lost its cojones and went native by joining the cartel that is the Irish banking system, thereby settling for a portion of the system's super profits rather than competing aggressively. It found it easier to charge the prevailing usurious rates than go head to head with the incumbent banks and so, Irish business lost an opportunity to be more competitive through reduced interest rates.

Now, 175,000 accounts and £30bn in loans later it pulls the rug from under its customers and exits stage left.

What is a BoSI business customer to do to open new lines of credit with other banks? Enterprises that are meeting their commitments have been told simply to move. A difficult proposition when the 'two and a bit' main banks (BoI, AIB and Ulster) are refusing to expand their SME customer bases, even for 'performing' firms. How much more difficult will it be for businesses suffering from the downdraft of the recession and struggling to meet their bank commitments? Not a hope.

So the spectre of enterprises unable to trade due to the lack of bank facilities is looming ever closer on the economic horizon, as the refusing banks, two of whom are the recipients of over-generous state funding and gigantic guarantees, are state assisted towards their former super-profits status.

The cherry-picking has already started, with the 'two and a bit' remaining banks taking over the more profitable (for them) accounts and as usual leaving the more vulnerable to fend for themselves.

Is it too much to expect that our government exercise its sovereign power to order the remaining Irish banks to open accounts for those businesses which now are 'bankless' due to Lloyds Group, once more, reneging on its promises to retain BoSI?

A similar system to that pertaining to motor insurance, where suppliers must quote for business, may be a stop-gap answer, in the short term. All banks trading in the republic would be mandated to accept transfers of business trading bank accounts when requested, including the working capital facilities. This would at least allow all firms, betrayed by BoSI, to transact business through the banking system.

Another ominous development in the banking area recently has been the withdrawal of finance leasing by six financial institutions, leaving one "open for business", albeit that this remaining bank has started adding 0.5% interest, to cover the "risk".

This leaves businesses wishing to lease motor fleets, plant or machinery in a very vulnerable position. Once more, this system failure must be addressed at government level.

There is no point in ministers telling us that we must trade our way out of the recession and that the future success of the economy will be built on the SMEs, if we cannot get access to lease finance for assets or, in some cases, cannot even get access to a bank account.

This BoSI announcement raises serious concerns on a number of fronts. Firstly, existing customers must be facilitated by the Irish banking system that has let them down through the withdrawal of Bank of Scotland (Ireland). Secondly, the drastically shrinking bank market will dramatically restrict all SMEs' options in attempting to secure finance. Thirdly, the reduced competition will allow the remaining banks to raise interest rates and charges without fear of losing their customers.

What is the solution to the sequel of the sorry tale of bankers' greed, rapaciousness and hubris, overseen by incompetent regulators, monitored by absentee civil servants and sponsored by gullible and gormless politicians?

Immediately, the minister for finance must order the two Irish banks to facilitate those businesses denied banking facilities by the withdrawal of BoSI, place a cap on all bank charges and ensure that the Central Bank closely monitors interest rates being charged.

Ideally, a third force bank should be introduced into the mix to offer strict competition; easier said than done. The question remains: is there the appetite for a third bank and should it be constructed from the carcasses of Anglo, Irish Nationwide and Permanent TSB, to form a new version of ICC, ironically once the darling of SME lending and gobbled up by the now swiftly departing BoSI?

Mark Fielding is chief executive of the Irish Small & Medium Enterprises Association (ISME)