Senator Canavan said: “Our committee’s recommendations go further than many previous reports on banking closures but there is clearly a need for a different approach.

“The major banks have not acted in good faith on the closure of branches in regional towns. There now needs to be a stricter and more proactive approach to rebuild financial services in the bush.”

Labor senators on the committee expressed concerns that some of its recommendations “could have unintended consequences on existing service provision in the regions”. “There may be unintended impacts on prudential supervision of banks, as well as competition and insolvency laws,” they said.

Australian Banking Association chief executive Anna Bligh sought to highlight the shift to digital banking, while also warning that establishing a new government-owned bank could threaten smaller banks that serve customers in regional areas.

“Given the past catastrophic failures of state-owned banks in this country, Australians should be wary of suggestions of a new taxpayer-funded government-owned bank,” she said.

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The Customer Owned Banking Association, whose members have a significant presence in regional areas, said increasing regulation on smaller banks with regional branches would be counter-productive.

“A government-owned competitor would be an unwelcome market intervention that could have significant unintended consequences. A better option is to support the many banks which have been providing regional banking services for almost 180 years,” Customer Owned Banking Association chief operating officer Stephanie Elliott said.

The report also said the government should declare access to financial services an “essential service” and guarantee the population have reasonable access to cash and financial services.

The Finance Sector Union backed key recommendations of the inquiry, including the committee’s call for a mandatory code on branch closures and the proposed investigation into a new taxpayer-owned bank.

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