Australia's banks could be forced to explain to customers their reasons for refusing services under proposed reforms by the nation's financial regulatory agencies body.
The Council of Financial Regulators has recommended four main policy responses to address the problem of de-banking, where a bank declines to offer or withdraws banking services to a customer.
In a joint statement, Treasurer Jim Chalmers and Financial Services Minister Stephen Jones welcomed the paper, saying the issue mainly affected the financial technology, digital currency exchange and remittance sectors.
"De-banking can increase the risks for affected businesses by forcing them to conduct transactions exclusively in cash," the statement reads.
"The government is committed to promoting innovation and competition in the financial services sector and will continue to work with affected customers."
Collecting de-banking data, new transparency and fairness measures, published guidance on risk tolerance to affected sectors by the major four banks and funding targeted education are the key reforms.
Banks would be required to document their reason for refusing a customer and provide those reasons to the individual or business.
Those customers would then be pointed to the bank's dispute resolution process and given at least 30 days' notice before services were closed off to them.
The research calls for the "lack of systemic data on the extent and nature of de-banking practices" to be addressed through voluntary data collection by the big four.
The government said it would formally respond to the recommendations at a later date.
