As calls for the establishment of a fifth pillar in the Australian banking industry grow, the country's credit unions and building societies appear to be heading into a collision course with major banks as the former urged the federal government for financial guarantee so they can effectively compete against the giant financial institutions.

Buoyed by the earlier encouragement from Federal Treasurer Wayne Swan, when he declared that credit unions and building societies could offer sufficient competition in the industry dominated by the big banks, some 120 of them called on the government to at least give them the same assistance being extended to Australian major banks.

Group chief executive Louise Petchler said on Thursday that her lobby group representing the small lenders is only looking for the same wholesale funding guarantee afforded to the country's banking sector at the height of the global financial crisis.

Ms Petchler told ABC that the proposition should not cost too much and Prime Minister Julia Gillard could very well afford to toss down her government's assistance, which anyway is in line with the banking reforms that the federal authorities had earlier committed.

She said that the government needs to ensure that the funding guarantee should be different this time around as compared to the earlier package, in which small lenders were burdened with fess of up to 150 basis points while big banks were only charged less than half, at 70 basis points.

The group said that with federal government's promised banking reforms, the new wholesale guarantee should come attached with flat-fee basis that would benefit Australia's regional banks, credit unions and building societies.

Such measures, according to Ms Petchler, should encourage the rapid onset of growth for small players in the banking industry and enable them to put more pressure on big banks by offering solid competition in the sector.

However, the lobby group's assertions seemed unwelcome for most of the banking industry players as Australian Bankers' Association (ABA) chief executive Steven Munchenberg declared that the idea of helping out small lenders at the expense of smaller banks would only attract opposition in the sector.

Mr Munchenberg told Sky News that the ABA would naturally opposed any measures that would put them at a disadvantaged situation as he stressed that preferential treatment by the federal government for credit unions and building societies would only discourage growth for small banks, which is also struggling in jostling for market positions against the country's big four.