The federal government's decision to take $120 million from the nation's banks to strengthen the corporate regulator amounts to "hush money", Labor says.
Treasurer Scott Morrison's plan for the Australian Securities and Investments Commission is also geared toward avoiding a royal commission into the financial services sector.
The government "has sold out Australians in favour of the big banks", Opposition Leader Bill Shorten said in Sydney on Wednesday.
"You can see Mr Turnbull's fingernail marks being dragged across the concrete of parliament in Canberra, where he desperately wants to do anything except see the truth shine through in the banking and financial services sector."
Mr Shorten warned the banks may pass the cost of bankrolling ASIC under a user-pays model onto their customers.
"They could well," he said.
Mr Shorten insisted restoring funding to the corporate regulator wouldn't put the issue to bed, claiming nothing short of a royal commission would do.
"The truth of the matter is asking the regulator to investigate themselves isn't going to fix anything," he said.
"What we need is a proper examination of the widespread health of the banking sector."
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