Amid a Coalition campaign for stricter banking regulations supported by the Australian Competition and Consumer Competition, banks today reiterated that while the world financial crunch lessened options for consumers, competition remained.

"There is no doubt that the global financial crisis (GFC) has meant that there is less choice. But that doesn't equate with a lack of competition," said the Australian Bankers' Association (ABA) chief executive Steven Münchenberg.

As a clear evidence of competition in Australia's banking system, he cited that banks have slashed, or removed altogether, a range of unpopular fees, such as late payment and overdrawn account fees, as they fight for customers' business in the past two years.

"For borrowers, banks are also offering a range of rates on mortgages and for savers, attractive rates on term deposits and online accounts," Mr Münchenberg added.

On the issue of banks' power, he said "The main reason banks have a greater market share at the moment is because Australia's solid, healthy banks stepped in to fill the credit gap left when other smaller lenders, particularly non-bank lenders, were forced out of the market by soaring funding costs."

"Had banks not increased their share of lending to home buyers, businesses and others, Australia would have experienced the sort of credit rationing that has badly damaged the economies of some other countries.

"But there are signs of life in the securitisation market and we have recently seen some non-bank lenders come back into the marketplace," Mr Münchenberg said.

ABA announced it would participate in any inquiry into competition in the banking and financial services sector in response to today's call in Canberra from a Liberal Senator and an Independent Senator.

Mr Münchenberg said "We also need to be wary of any proposals to re-regulate the banks when new international rules are still uncertain and their impacts on Australia are unclear."

"If this inquiry goes ahead, a good starting point would be to read the submissions and reports from the half dozen inquiries into aspects of competition in banking and financial services which have been held in the past two years."