The banks are doing this after agreeing to implement the recommendations in an independent review into remuneration.
Former Australian Public Service Commissioner Stephen Sedgwick has made 21 recommendations.
One of his key recommendations is that that banks should no longer offer incentives based directly or solely on sales performance.
Banks have also been told that brokers’ payments should not be linked to loan sizes.
Australian Bankers’ Association chief executive Anna Bligh said the changes would be implemented as quickly as possible.
“This represents a transformational change in the way banks go about their business. It is a clear demonstration all banks are serious about making a better banking industry,’’ Ms Bligh said.
“There are 140,000 Australians who work in banks and care about their customers. The industry wants to ensure they are rewarded for the right things and getting the best results for customers.
“The independent findings will be important for individual banks to build on changes already made to remuneration to promote higher standards across the industry.”
She said it would be a big challenge for the banks.
“Banks don’t underestimate the changes recommended by Mr Sedgwick. This will not be easy for banks and there will be challenges,” Ms Bligh said.
“Changes will need to be made to bank policies, workplace agreements, contracts, staff training programs, internal controls, and performance management systems.
“This is not just about payments; it’s about governance and leadership. It’s not just about bank tellers and their managers; it goes up the line.
“Banks have heard the criticism about the sales culture. The industry needs to embed a customer-focused culture so customers have confidence banks are doing the right thing by them.”
However, Australia Industry Super says it’s concerned the Sedgwick review does nothing to stop banks cross-selling their underperforming super funds to the public and fails to address remuneration practices used to cross-sell superannuation products.
It says this has the potential to undermine public trust in the superannuation system as a whole.
“The banks appear blind to the social policy objectives of compulsory super, which logically should be subject to stronger protections than other financial products”, said Industry Super Australia Chief Executive, David Whiteley.
“The banks must address the cross-selling of compulsory super urgently. If not, the government must step in.
“It is a tall order to ask staff to both meet sales targets and genuinely serve customer needs when the products they are required to sell are designed to generate revenue and therefore may not be the best on offer.”
Mr Sedgwick told the banks they had to accept these changes. It was not only about doing the right thing but being seen to do the right thing, he said.
“Frankly guys, it’s in your best interests to do the right thing by customers and shareholders and that means adopting these recommendations regardless of what you perceive others might do,” Mr Sedgwick told the Australian Financial Review.
“All industries face the risk of disruption, but when there is already a trust deficit the public will have far less tolerance of mistakes for established players than they will have for start-ups. The benefit from moving quickly is clear.”