Key areas for the banking royal commission

Short-term profit has been pursued at the expense of basic standards of honesty, his interim report said.

Mr Hayne said the banks had gone to the edge of what was permitted and beyond that limit because they could and because they profited from the misconduct.

The interim report was scathing about the $1 billion problem of customers being charged fees for financial advice when no service was delivered.

The conduct was both dishonest and inexcusable, Mr Hayne said.

The final report will likely again focus on the problem, accelerating the payment of compensation and improvements in systems to prevent it happening again.

Following the interim report, the Australian Banking Association announced changes to its new industry code to end fees for no service and stop charging deceased estates.

The financial services companies appear to believe the law only applies when and if they chose to obey it and weak regulators have let much of the misconduct go unpunished, the interim report concluded.

Mr Hayne wants financial services laws obeyed and enforced by strong regulators, rather than bringing in new laws.

"Passing some new law to say, again, 'do not do that' would add an extra layer of legal complexity to an already complex regulatory regime. What would that gain?"

Mr Hayne slammed ASIC and APRA for failing to mark and enforce the bounds of permissible behaviour, saying the misconduct either went unpunished or the consequences did not meet the seriousness of what occurred.

Both regulators have pledged to be tougher.

ASIC now plans to take criminal and civil action more often, rather than negotiating resolutions with the big banks and others.

It has become harder to get a loan as regulators made banks tighten lending standards and the royal commission put the focus on ensuring money is lent responsibly.

The availability of credit will likely be further restricted after Mr Hayne's recommendations.

Banks will have to do more to verify customers' income and their actual living expenses, rather than relying on the widespread use of benchmark expenditure measures.

Issues with responsible lending extend beyond mortgages to include car loans, credit cards, personal loans and add-on insurance.

Australia's banks face pressure to radically change the way they pay staff including senior executives after Mr Hayne slammed the emphasis on rewarding sales and profits.

The major banks all made changes to their remuneration practices after the independent Sedgwick review in 2017 recommended an overhaul, although the royal commission's interim report noted they continued to emphasise sales.

The recommended changes will likely cover all bank staff, not just senior executives.

Mr Hayne may recommend significant changes for brokers and other intermediaries in the home loan industry.

He said reforms to broker remuneration agreed to by the industry, such as eliminating volume-based commissions, are limited and do not deal with the basic problem of people being encouraged to borrow more than they need.

Financial advisers also face potential changes to their remuneration, most notably over grandfathered payments and trail commissions.

The final report will also have significant ramifications for the insurance and superannuation industries, including their regulation.

Mr Hayne has been considering whether cold calls to sell insurance should be banned and if some types of policies such as accidental death products should not be sold.

Australian Associated Press