The banking sector has questioned why its executives will be hauled before a parliamentary committee when no other businesses are forced to "justify their commercial pricing decisions".

Prime Minister Malcolm Turnbull and Treasurer Scott Morrison have announced the nation's major banks will have to face the House of Representatives Economics Committee at least once a year to explain their treatment of customers.

It follows this week's decision by the Reserve Bank to cut official interest rates to a record low 1.5 per cent — a cut that has not been passed on in full by the major banks.

"In recent years, senior executives, including our CEO, have frequently appeared in front of parliamentary committees," a spokesperson for the Commonwealth Bank told the ABC.

"We have always said we are willing to appear before the Parliament if asked.

"Our full-year results will be released to the market next week and we will take that opportunity to explain the current economic conditions and business drivers then."

The Australian Bankers' Association (ABA) said the Federal Government was entitled to call the banks before a parliamentary committee.

"However, no other businesses are required to justify their commercial pricing decisions in this way," chief executive Steven Munchenberg said.

"We are confident banks can explain why the interest rates they set for borrowers are determined largely by the costs of funds and the pressures of a highly competitive market, not the Reserve Bank cash rate.

"Since the start of the global financial crisis, over eight years ago, the Reserve Bank's cash rate has not mirrored the actual funding costs of banks.

"Banks have explained repeatedly why the Reserve Bank does not set interest rates."

Mr Munchenberg said a number of banks had raised their deposit interest rates, increasing costs.

"About two-thirds of bank funding comes from deposits and banks have raised interest rates on a range of those deposits, even as the Reserve Bank cut the cash rate," Mr Munchenberg said.

"This is great news for the many Australians, in particular seniors, who rely on their savings in retirement and who are being squeezed by low interest rates.

"At the same time, those Australians with a mortgage continue to enjoy the lowest interest rates in over 50 years."

Westpac 'more than happy to appear' before Parliament

Westpac chief executive Brian Hartzer said his bank had always been happy to explain how it funded its mortgage offerings.

"We also think it's important that the public understand the work that the Government, regulators and banks have done to make our banking system more secure, and the costs of doing that," Mr Hartzer told the ABC.

"If that's the purpose of this announcement, we will be more than happy to appear [before a committee]."

That message was echoed by NAB chief executive Andrew Thorburn.

"We look forward to the dialogue around how we balance these important themes — the delicate balance between different stakeholders, outlining the full cost of being an unquestionably strong bank, and bringing further insight to the topic of how we set our interest rates," He said in a statement on the bank's website.

"I am proud to be a banker.

"It has always required carefully thought through decisions, but the focus has been on serving the many people who rely on us to get these decisions right."

ANZ chief executive Shayne Elliott said he accepted it was "a necessary initiative in the current climate".

"I welcome the opportunity to represent ANZ's views and to answer the tough questions that I know will be forthcoming in any parliamentary appearance," Mr Elliott said.

Turnbull says reporting to MPs will 'drive some cultural change'

Earlier, Mr Turnbull said requiring banks to justify their actions in person to politicians would "drive some cultural change".

"What this will do is create a regular and permanent method of accountability and transparency for the banks," he said.

"This is an important step, a permanent step, a permanent change in the regular financial calendar that will require the banks to become accountable."

Mr Turnbull said it would be more effective than a royal commission into the banking sector, something the Federal Opposition has been pushing for.

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Shadow Finance Minister Jim Chalmers responded to the announcement on social media, labelling the Prime Minister as "weakness personified".

Treasurer Scott Morrison made the announcement alongside the Prime Minister, saying that he had already spoken with the major banks and they had agreed to take part in the process.

Mr Morrison said that the committee would be able to call "whoever they believe appropriate" for both public and private hearings.

Shorten, Plibersek label solution 'weak'

Deputy Labor Leader Tanya Plibersek told reporters it was a "weak measure from a weak prime minister".

"Malcolm Turnbull wags his finger at the banks and the banks do what they always do," she said.

Opposition Leader Bill Shorten echoed Ms Plibersek's response, calling the solution "a friendly catch-up, not an investigation."

"Mr Turnbull wants to give the banks an annual reunion, we'll give them a royal commission," he said.

The Prime Minister differentiated the new policy from a royal commission by saying the latter would come to an end, whereas their reports to the parliamentary committee would be ongoing.