Updated August 17, 2018 15:41:21

Photo: RBA governor Philip Lowe says the bank royal commission is shining a light on and clearing up appalling practices. (ABC News: Michael Barnett)

Reserve Bank governor Phillip Lowe says he has been appalled by the behaviour of Australia's banks, and blames remuneration that rewards sales for the scandals.

Dr Lowe said the banking royal commission was "showing the benefit of sunlight" being shone on the internal workings of the banks.

"Sunlight is acting as a very good disinfectant here. We need this disinfectant, and it actually working," Dr Lowe told a House of Representatives economic committee hearing.

"Like most Australians I have been following what's been happening very carefully, and I have to say I'm incredibly disappointed and in many cases I've been appalled."

As governor of the Reserve Bank Dr Lowe is also a powerful regulator of the banking sector, and chairs the Council of Financial Regulators which includes APRA, ASIC and Treasury.

Dr Lowe noted the foundations of the finance sector were trust, delivering service and good risk management.

"What we've seen in the royal commission is deficiencies in all those three areas."

Dr Lowe said the commission had exposed the banking sector's "pervasive" conflicts of interest.

"There's not enough attention paid to customer service and doing the right thing by customers.

"The second common theme that I've detected through the hearings is the role that remuneration structures within financial institutions play in driving behaviour.

"We've seen remuneration structures that have driven quite poor behaviour.

"We need to rebuild trust, we need to have a very strong focus on service rather than sales and risk management."

Topics: consumer-protection, corporate-governance, banking, royal-commissions, australia

First posted August 17, 2018 13:01:21