Federal Labor says it will hold a royal commission into misconduct in the banking and financial services industry if it wins government at the next election.
Labor Leader Bill Shorten and shadow treasurer Chris Bowen called on Prime Minister Malcolm Turnbull to hold the Royal Commission, arguing public confidence in the banking and financial services industry has taken "hit after hit over the previous few years".
"Many Australians have suffered through the decisions of banks and financial institutions," Mr Shorten said.
"The decision that we announce today is about restoring confidence in our financial institutions. It is about taking action to rebuild that vital trust between Australian consumers and their banks."
Shorten said the decision to propose the Royal Commission had not been taken lightly.
Bowen said the Commission, which is estimated to cost $53 million and take two years to complete, would look at the financial services industry and not broader corporate Australia.
It would look at how widespread instances of illegal and unethical behaviour are in the financial services industry, how Australia's financial services industry understand and give effect to their duty of care to their consumers, Bowen said.
The culture, ethical standards and business structures of Australia's financial institutions would also come under the spotlight, as well as whether Australia's regulators are equipped to identify and provent illegal and unethical behaviour in the sector.
On Tuesday it was reported the Australian Securities and Investments Commission (ASIC) launched Federal Court proceedings against Westpac for unconscionable conduct and market manipulation for Westpac's part in setting the bank bill swap reference rate (BBSW) between 2010 and 2012.
The proposal was earlier dismissed by Treasurer Scott Morrison, who took aim at Shorten's "ill-fitting suit" and labeled him “reckless” for proposing the Royal Commission.
Morrison said the latest announcement is an attempt to distract from the government's proposed Australian Building and Construction Commissioner (ABCC) legislation -- which would create a watchdog for the building and construction sector -- and is expected to be cosnidered on April 18.
Labor voted against a royal commission into the finance sector a year ago, Morrison said.
"But apparently in the eve of an election when there are a few reports about banks, Bill Shorten is up there in hill ill-fitting suit, puffing his chest up and saying we need to thump the table," he told the ABC on Friday morning.
"This is classical political distraction."
Prime Minister Malcolm Turnbull has recalled Parliament on April 18 over the ABCC legislation.
If it fails to pass the Senate, the Turnbull has said he would call a double dissolution election on July 2.