That motion, put forward by Opposition Leader Bill Shorten and backed by independent MP Bob Katter, called for a royal commission to ensure a "thorough investigation of the culture and practices within the financial services industry".

The motion had been much-anticipated and to head off the move, Coalition MP George Christensen - who has himself previously supported a royal commission - moved a counter motion that killed off Labor's proposal and made clear he was satisfied with his government's response.

At the same time, Financial Services Minister Kelly O'Dwyer on Wednesday announced, minutes before Labor's parliamentary manoeuvre on the royal commission, a new inquiry into the banks' small business lending practices, which could lead to further regulation.

In Parliament, Mr Shorten tore in to the banks and Prime Minister Malcolm Turnbull, who he labelled "the lunchtime warrior who gives Westpac a lecture".

"Every Australian uses a bank, but too many Australians are being used by their bank. Now, the government knows there is a problem...we have to acknowledge that there have been too many troubling incidents over recent times for them to be simply be dismissed," he said.

"You get a sense here that the government will do anything and everything, say anything and everything to avoid a royal commission into banks.

"Only the government could think that it is a good idea to give a multibillion-dollar tax cut to the big banks."

Mr Shorten highlighted the previous support of a few Coalition MPs, including Mr Christensen, for a royal commission and said the plan to establish a new banking tribunal, which has been floated, was tantamount to an admission that problems with the banks had to be addressed.

He was backed up by the animated Mr Katter, who railed against the major banks in an at-times contradictory speech that included the observation that he would "have to live until the day I die".

Mr Christensen then led the successful government push to block the royal commission by moving a motion acknowledging community concerns over bank bad behaviour and noting many of the scandals that have emerged in Australia's major banks happened when Bill Shorten was financial services minister.

He also pointed out the government had conducted the Murray review into the financial system, bolstered ASIC's resources and pointed out that the bank chiefs will have to appear before a parliamentary committee every year.

ASIC had also "commenced legal proceedings against three of the big four banks for alleged market manipulation of the bank bill swap rate; has commenced an investigation into the allegations surrounding CommInsure and the broader life insurance sector; and is undertaking investigations into the conduct of the largest financial advice firms, as part of its Wealth Management Project".

"In addition a royal commission would send a signal internationally that there are structural problems with our banking and financial system which would have significant repercussions for confidence, international investment and for our AAA credit rating."

Mr Christensen's amending motion was eventually supported - after a chaotic series of votes and argument about pairing arrangements - which defeated Labor's attempt to get parliamentary support for a royal commission.

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