INDEPENDENT MP Andrew Wilkie believes the voluntary code of conduct used by the banking sector is a "toothless device" and must be changed to support consumers and small business.

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The Tasmanian MP says that since 2004 there have been 2.5 million complaints made against Australian banks but under the current code only 200 have been investigated.

"There is clear evidence the current voluntary code of practice, which has been set up by the banks, run by the banks, overseen by the banks, frankly, it just doesn't work," Mr Wilkie told reporters in Canberra.

He will introduce a private members bill into parliament to establish a mandatory banking code of conduct and give the Australian Prudential Regulation Authority (APRA) additional powers to "name and shame" banks that don't follow the code.

It would also be able to fine banks that are repeat offenders.

Mr Wilkie said the new code would be determined by the relevant minister in consultation with the banks and consumers groups with the current code as its basis.

He said his actions were in response to approaches from small business that have found themselves in dispute with the banks.

The banking industry rejected Mr Wilkie's claims that the current code was "toothless", saying it works well for banks' customers, including small businesses.

Australian Bankers' Association chief executive Steven Munchenberg said the code was a contract between customers and subscribing banks, which means courts can review compliance with the code.

"Banks' small-business customers and individual customers have a number of avenues they can take a complaint if they believe that a bank has breached the code of banking practice," Mr Munchenberg said in a statement.

These include the Financial Ombudsman Service, the Code Compliance Monitoring Committee, and the Australian Securities and Investments Commission.

"APRA is a prudential regulator and has no role in looking at these types of issues," he said.

"We need to be wary of just adding additional layers of regulation that make it more risky and expensive to lend to small businesses."