The Government is backing away from its commitment to establish a banking tribunal, insisting it was only talking about a "small 't' tribunal" when it floated the idea in October.

Now a report has recommended the Government establish a new ombudsman to replace the two financial services ombudsmen that already exist.

In October Prime Minister Malcolm Turnbull said "what we are working towards is having one tribunal that deals with consumer complaints in a cost-effective and speedy way".

Financial Services Minister Kelly O'Dwyer told The World Today: "When the Prime Minister was talking about a 'tribunal' he was talking about a small 't' tribunal, which was a catchall for having a one-stop consumer complaints stop."

She explained the difference between a "big t" and "little t" tribunal.

"One is far more legalistic, which means it is probably less consumer friendly and that is a 'big t' tribunal," Ms O'Dwyer said.

"That makes it more difficult for consumers to engage, which is what the report has found."

Ms O'Dwyer denied a move toward establishing an ombudsman was inconsistent with Mr Turnbull's undertaking in October.

"This is entirely consistent with what we set out in April when we said there is a significant issue here that we need to deal with," she said.

Mr Turnbull's comments in October came amid appearances by the bosses of Australia's big four banks before a parliamentary committee looking into cultural issues in the scandal-plagued sector.

The committee recommended the Government "…introduce legislation, if required, to establish a Banking and Financial Services Sector Tribunal by July 1, 2017".

It said the Tribunal should replace the current ombudsmen.

It also recommended the Tribunal be paid for by the banks.

Unlike a Tribunal, ombudsmen services are not backed by legislation.