Legislation was introduced to the Senate last week calling for the equivalent of a royal commission into the financial services industry.

It demands an inquiry that will report to Parliament, rather than a royal commission that reports to the Government.

The Banking and Financial Services Commission of Inquiry Bill was introduced by Peter Whish-Wilson and supported by senators Pauline Hanson, Derryn Hinch, Jacqui Lambie, Malcolm Roberts and Nick Xenophon.

Senator Whish-Wilson told the upper house the inquiry is needed “to hold the banking and financial services sector to account”.

He says continuous revelations of misconduct within the banking and financial services sector in recent years have undermined the trust of customers.

“This inquiry will reduce risk and improve stability in Australia’s financial system.

“It will allow us to carve out and cleanse the corrosion that threatens the entire system. As a result, our financial system will be stronger and more resilient, and it needs to be.”

The inquiry would be led by a former judge and cover banks, insurance companies, superannuation funds, advisers and financial product retailers.

It would be empowered to examine the extent of misconduct and its impact, and causal factors including incentives, culture, inadequate regulation and regulatory power.

The commissioner would have power to compel witnesses and the production of evidence.

Liberal Senator Jane Hume told the Senate the Coalition does not support the Bill.

“Such a commission will not benefit consumers and nor will it benefit the Australian economy,” she said. “A royal commission will cost taxpayers millions and millions of dollars. It will take so many years to complete. It would undermine the confidence that we have in our banking sector.”

Senator Hume says a number of financial services industry inquiries are being held by both houses, with reports due in the next year.

“It is unnecessary to take it to a further inquiry with royal commission powers or a commission of inquiry,” she said. “We will be plagued by inertia waiting for yet another inquiry – an incredibly expensive and totally unnecessary inquiry.”

Leader of Opposition Business Senator Katy Gallagher says Labor believes current inquiries are leading towards a royal commission.

“Labor’s firm position is that a royal commission into Australia’s banking and financial services sector is the only way to get to the bottom of all the rip-offs, scandals and misconduct we have seen across the sector in recent years,” she said.

“Labor is supportive of the commission of inquiry legislation in a very broad sense, subject to going through our normal party processes.”

The Bill’s second reading will continue after it ran out of time last week.