The banking regulator has said it will establish an independent inquiry into the Commonwealth Bank.

Key points: Independent panel appointed by APRA to investigate culture, governance and accountability at CBA

Independent panel appointed by APRA to investigate culture, governance and accountability at CBA CBA will pay for the cost of the inquiry

CBA will pay for the cost of the inquiry Final report expected to take around six months and be made public

The Australian Prudential Regulation Authority (APRA) said the inquiry would focus on governance, culture and accountability frameworks and practices within Australia's biggest bank.

The APRA inquiry follows Federal Court action by the financial intelligence agency AUSTRAC, which has accused CBA of breaching anti-money laundering regulations on nearly 54,000 occasions.

In addition, corporate regulator ASIC is investigating CBA to determine whether its directors met continuous disclosure obligations to its investors, while a potential shareholder class action against the bank has also been announced.

An independent panel will be appointed by APRA to investigate the bank's practices, with CBA footing the bill for the inquiry.

APRA chairman Wayne Byres said the Commonwealth Bank was financially sound and well-capitalised but a series of scandals had dented public confidence in the institution.

"The overarching goal of the prudential inquiry is to identify any core organisational and cultural drivers at the heart of these issues and to provide the community with confidence that any shortcomings identified are promptly and adequately addressed," he said in a statement.

Treasurer's 'Nike approach'

Treasurer Scott Morrison said he has been talking with APRA and the other financial regulators about the CBA case, but added that the inquiry was not instigated by the Government.

"This is a practical inquiry by APRA, it isn't a show trial," he told reporters at a press conference.

"It isn't a political witch-hunt. It isn't any sort of political process. They are an independent regulator."

Mr Morrison said a pattern of poor regulatory compliance and bad practices by the Commonwealth Bank across several business areas have forced the regulator's hand.

"There hasn't just been one incident here with CBA, there have now been a series of incidents," he added.

"I think that is what has brought APRA forward, to look at what are the broader issues, here, the organisational issues, the corporate governance issues, and so on."

However, Mr Morrison again dismissed calls from Labor, The Greens and much of the crossbench for a royal commission into the banking system.

"It's not going to get anything happening now, it's just going to kick the issue down the road for another three years," he said.

"The things that a royal commission could potentially recommend, we're already doing that.

"Increased powers and resources for ASIC - tick, done, swoosh.

"Just do it. The Nike approach. That's what we're doing with banks."

CBA welcomes 'opportunity' to 'strengthen trust'

Mr Byres said the Commonwealth Bank has promised its assistance with its inquiry.

"The chairman and CEO of the CBA have assured me that the bank will fully cooperate with the inquiry, and APRA welcomes that cooperation," he said.

The bank's outgoing chief executive Ian Narev — who announced that he would leave the bank before the end of the financial year after the money laundering scandal broke — told ABC's The World Today that he would ensure cooperation with the investigators.

"The commitment that I have given, that our chairman has given, that they can get from the whole of the Commonwealth Bank, is whatever information the panel requires to do its job appropriately, with the terms of reference that are determined, it will get from the Commonwealth Bank," he said.

"This is a time that we need to do, and be seen to do, a lot to strengthen trust."

The bank put out a statement just after APRA announced its inquiry, confirming its cooperation.

"We have been working hard to strengthen trust, and will continue to do so," chairwoman Catherine Livingstone said.

"We welcome this opportunity for independent parties to review the work we have already undertaken and advice on what more we can do."

The Commonwealth Bank has indicated it will challenge some parts of AUSTRAC's court case against it.

In particular, CBA is likely to claim that because one software error led to the failure to report nearly 54,000 transactions it only broke that law once, not almost 54,000 times.

The formal terms of reference are yet to be set and APRA said the final report is expected around six months after the inquiry officially gets underway.

APRA said the final report would be made public.