Former Liberal minister Andrew Robb pressed the Turnbull government to hold a royal commission into the banks but one with a narrower scope to stymie the Labor Party's assault on the major banks, cabinet sources say.
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A source familiar with the event has confirmed details reported by the Financial Review, saying that Mr Robb, a former trade minster in the Turnbull and Abbott governments, used a private gathering convened by the cabinet minister Kelly O'Dwyer last week to push for an inquiry so that it might close the issue.
"He said Labor wouldn't give up on their political demands and maybe we should consider holding a narrow one [inquiry] to say we have done it," the source told Fairfax Media.
But Ms O'Dwyer, Minister for Revenue and Financial Services, pushed back according to sources, questioning whether the government, which is elected to govern in the national interest, would be expected to cave into all the "wild demands" oppositions propose.
She said the government would always get wild demands from oppositions and minor parties to do all sorts of things that they were pushing because it was in their political interest but said the Coalition was in government and had to govern for the national interest, sources who attended the meeting said.
The minister further advocated the government's position – to create a one stop shop for consumer complaints – which will provide speedy access to justice, binding resolutions and access to compensation where appropriate.
She warned that a royal commission would threaten Australia's AA credit rating and damage the reputations of the banks, according to the Financial Review
Mr Robb did not press the issue.
The move comes as the Greens hold negotiations with a Senate cross-party group on Tuesday about a plan for a commission of inquiry into the banking sector, put forward by treasury and consumer affairs spokesman Peter Whish-Wilson.
Opposition financial services spokeswoman Katy Gallagher said members of the government were pushing back on the "blind refusal" of the government to establish a royal commission.
"More and more we're seeing people come out, including on the government benches and now a senior former minister, to try to talk sense into this government about a banking royal commission," Senator Gallagher said.
"We know that there are many on the government side who are wanting to see a thorough, transparent inquiry into the banks, and I think we're all on the same page and we want a strong, profitable and well-led banking sector in Australia."
Labor would consider the Greens plan, she said, but issues about how it would be funded remain. It could also win support of Queensland Liberal-National backbencher George Chistensen.
The Greens' draft legislation would see an inquiry report back to Parliament instead of the the government.
