Labor has called on the government to launch a royal commission into banks and financial services and said, if it refuses, Labor would do so if elected.

The decision was announced on Friday by the opposition leader, Bill Shorten, and the shadow treasurer, Chris Bowen.

The royal commission would conduct a two-year inquiry into the banking and financial services sectors, including superannuation funds, and cost $53m.

Shorten said the sector had been rocked by a string of scandals that were “not isolated and one-off examples” but rather pointed to systemic problems in the industries.

Shorten said calling a royal commission was “an important decision, it’s most certainly not made lightly”.

“Australia has one of the strongest banking sectors in the world and we want to keep it strong,” he said.

“But public confidence in the banking and financial services industry has taken hit after hit over the previous few years. Many Australians have suffered through the decisions of banks and financial institutions.

“Retirees who have lost their retirement savings, small businesses who have lost their livelihood, Australian families who have lost hundreds of thousands of dollars, life insurance beneficiaries denied justice and legitimate claims. There are literally tens of thousands of victims if not more. And today I say enough is enough.”

Bowen said the royal commission’s objectives would include considering how widespread illegal and unethical behaviour is, banks’ duty of care to consumers, how culture, ethical standards and business structures affect conduct, and whether Australia’s regulators are well equipped to identify and prevent illegal and unethical behaviour.

Recent bank scandals include the Commonwealth Bank financial planning scandal, allegations CommInsure may be routinely denying legitimate claims from sick and dying customers and an Australian Securities and Investment Commission (Asic) suit against Westpac for alleged rate rigging.

On Thursday Shorten had refused to rule out a royal commission, prompting criticism from the treasurer, Scott Morrison, who labelled the idea a “reckless distraction” from a bill to introduce a tougher construction industry regulator.

Morrison said responses to banking scandals needed to be proportional.

He said “the problems have been identified and are being dealt with” by the Australian Securities and Investments Commission (Asic), which he called “a tough cop on the beat”.

He said calling for a royal commission implied widespread corruption in the banking industry, which would harm the international reputation of Australia’s banks.

“[Labor] voted against it a year ago,” Morrison said. “Apparently on the eve of the election there are a few [news] reports about banks and Bill Shorten is there in his ill-fitting suit saying we need to thump the table.”

After Labor’s announcement, Morrison reiterated the comments.

“The government is not proposing a royal commission and has opposed one consistently,” he said. Morrison added that the Murray financial system inquiry did not back a royal commission.

Shorten rejected the claim the banking royal commission was a distraction and said it was negligent to ignore the scandals.

“Labor sadly hasn’t invented tens of thousands of financial victims,” he said.

The Australian Bankers’ Association’s chief executive, Steve Munchenberg, said: “We don’t understand what this royal commission is meant to achieve.”

Munchenberg acknowledged there had been “too many incidences where banks have failed to live up to their own standards and the standards of their customers”.

But banks were already subject to incredible scrutiny, including parliamentary financial sector inquiries and oversight by Asic, he said.

Munchenberg said the royal commission sent a worrying signal and would decrease confidence in the banking system. Foreign investors would “be asking what is wrong with Australian banking sector”.

Industry Super Australia welcomed the call for a royal commission. It said it was “increasingly concerned that the lack of community trust and confidence in the scandal-prone banks could infect public confidence in their lines of business in compulsory super”.

The industry super fund group said the royal commission should consider banks’ vertically integrated business model and whether to structurally separate banks and super.

Pressure has grown for a royal commission into banks, with the MP Warren Entsch calling for one on Thursday. He joins the Greens and crossbench senators in backing the idea.

On Wednesday the prime minister, Malcolm Turnbull, highlighted wrongdoing by banks in an address to Westpac.

The prime minister said: “We have to acknowledge that there have been too many troubling incidents over recent times for [concerns to] simply to be dismissed.

“Redressing wrongs is important, especially where it is done promptly and generously.”

Entsch welcomed Turnbull’s recognition of problems in the sector but said “an apology from the big banks and a commitment not to do it again in the future is not enough”.

“I believe we need to go further – we need a full royal commission into the profit-driven and immoral activities of the big banks and they must pay an appropriate level of compensation to clients for past wrongs,” he said.

Last year Labor joined the government to vote down a Greens proposal for a royal commission into banks. The Nationals senator John Williams crossed the floor to support the proposal.