Former Howard government minister and long-serving Liberal MP Philip Ruddock has warned the banks must address serious concerns if they are to avoid a royal commission.

A handful of National and Liberal backbenchers have voiced their support for consideration of the national inquiry, after Labor announced it would hold a royal commission if it wins this year's election.

Labor argues the wide-reaching inquiry is needed to investigate allegations of fraud, dishonest and unethical insurance practices, shoddy financial advice and interest rate rigging at Australia's major banks.

Prime Minister Malcolm Turnbull and a number of his frontbench colleagues have played down the importance of holding a royal commission, flagging more funding for the existing bodies that regulate the industry.

Mr Ruddock released a short statement on Monday afternoon saying: "The banking industry has serious issues it need to address if it wants to avoid a royal commission".

Mr Ruddock's intervention is particularly significant because he sits on a joint parliamentary committee which is due to report on investigations into corporations and financial services.

Nationals MPs John Williams and George Christensen are strongly backing the calls for a royal commission, while their colleagues Luke Hartsuyker and Ken O'Dowd have signalled they are open to the idea.

Mr Hartsuyker, who was dumped from the frontbench in the latest ministerial reshuffle, told Fairfax it was "definitely something that should be considered".

Mr O'Dowd said he was "open to the idea" but wanted to see more evidence to show whether it was needed. He said he was worried about the potential for an inquiry to damage the reputation of the nation's biggest banks overseas.

Another Government MP, Liberal backbencher Warren Entsch, is also in favour of the probe, arguing it is critically needed.

Let ASIC handle it: Joyce

But Deputy Prime Minister Barnaby Joyce has poured cold water on the internal push for the commission to go ahead.

He argues the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) are already doing the job.

"The powers of disclosure vested in ASIC and APRA are just as powerful as a royal commission," Mr Joyce said in a statement.

"Labor voted against a royal commission only 12 months ago. You have to ask why they are now suddenly jumping on this bandwagon."

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Nationals member for the Victorian seat of Mallee Andrew Broad is also cautioning against the commission of inquiry.

"I think we need to be very careful of trying to fall into a class warfare mentality that says the banks are somehow bad and therefore we need a royal commission into them," he said.

Shadow attorney-general Mark Dreyfus has questioned the Government's insistence that ASIC can do the job of a royal commission.

"There is no more powerful body to address systemic problems and misconduct than a royal commission," he said.

Mr Dreyfus argues ASIC can deal with individual cases and pursue individual allegations of wrongdoing, but "a royal commission has a far broader reach".

"It searches for the roots of the problem and identifies the context and causes of individual cases of misconduct, and how these can be addressed," he said.

"Because it is charged with examining an entire system, it can compel the production of documents and call witnesses from a wider pool than an individual investigation of the kind ASIC normally runs can.

"Only a royal commission has the broad powers to expose and address the systemic problems we can see in our financial services industry."