The Royal Commission's damning report on Australian banks, including the parent companies of four major New Zealand banks, is a warning for New Zealand, experts say.
"They're saying they need to put the customers' interests first which seems extraordinary because you'd assume that would be the case anyway," money expert David Boyle told The AM Show.
The Royal Commission found 24 instances of potentially criminal corporate behaviour in Australia's banking sector.
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Commissioner Kenneth Hayne has made 76 recommendations in the damning report, which are likely to drastically change the country's financial services sector.
"It's going to take everyone a bit of time to understand exactly what the recommendations mean and the ramifications it will have, not just in the banking sector, but the overall financial services sector," Mr Boyle said.
The Royal Commission has recommended radical changes to Australia's superannuation and home loan sectors. Mr Boyle said there could be up to $2 billion in compensation for fees being paid with no service provided.
"The financial services industry has not had a shakeup like this ever, that I can remember."
Asked how New Zealand will respond to the report, since four of New Zealand's major banks are owned by Australian companies, Prime Minister Jacinda Ardern said New Zealand will not hesitate to introduce regulations.
"We've already indicated that we're not afraid to regulate, that's certainly the area we're looking to go down when it comes to the way insurance products have been treated," she told The AM Show on Tuesday.
Mr Ardern was referring to the Government's response last week to a damming report into the New Zealand life insurance industry, which said it puts profit ahead of people.
Some customers were charged premiums even after their policies had expired, were given incorrect information, or were not told about higher charges or reduced coverage when they renewed or changed their insurance policies.
Commerce and Consumer Affairs Minister Kris Faafoi said Cabinet agreed to get rid of sales incentives. He said incentives such as loaded up-front commissions and overseas trips can "cause a conflict for the salesperson".
Asked how the Royal Commission's report will affect the overall banking sector, Kiwibank chief executive Steve Jurkovich told The AM Show, "A lot of soul-searching will be going on."
The former ASB Bank and Commonwealth Bank employee said the findings of the report were not unexpected, but that the extent of how far-reaching it was "will cause a lot of heartache".
"The most shameful part is the systemic pocketing of fees for no service. No matter which way you craft that it's out of order," Mr Jurkovich said.
"It was quite shocking to see what came out of the report, because that's certainly not what I saw from my colleagues [when he worked in Australia] but in a large organisation like that you're not aware of everything that's going on."
All four major New Zealand banks, ANZ, ASB, BNZ and Westpac, have Australian parent companies.