Suddenly, the fear has been reversed.

After a fortnight of attempting to whip up alarm with customers, with claims a bank inquiry would force interest rates higher, the boot is on the other foot.

Bank shares took a pounding this morning, as investors took flight, following revelations that, overnight, the big four banks had capitulated and called for the Prime Minister to establish a royal commission into banking.

Faced with the prospect of a parliamentary inquiry, it was a desperate attempt to retain some control over the process and, in particular, exactly what will come under the microscope.

But what exactly do they have to fear? What secrets lurk deep within the vaults of our finance sector that have so much potential for damage?

Since the financial crisis, our banks have been subject to a litany of complaints, ranging from market manipulation, overcharging customers, denying legitimate claims, falsifying records and even failing basic standards on statutory responsibilities, such as reporting transactions related to money laundering.

In that time, they have been either fined or forced to compensate customers to the tune of more than $1 billion. Surely, there's nothing more that could top that.

Well, yes, there is.

While our regulators and, for the most part, customers themselves, have launched legal action on individual misdeeds, the broad landscape has been obscured.

What now is apparent is there has been a behavioural shift since financial deregulation in the 1980s, where ethics have been subsumed by the demand for earnings. And it has been achieved primarily through the bonus system.

The more an employee sells, the more they earn. It's a system that guarantees rules will be bent and standards lowered.

Blanket yet to be lifted on real estate

It's become apparent in every area of banking, from financial planning, insurance, small business loans and superannuation. But there is one area where the blanket has yet to be truly lifted.

It is on the biggest earnings' driver for our banks — real estate. Consider these sobering facts.

Australian capital city real estate is among the world's most expensive and least affordable

Australian household debt is among the highest in the world

The big four banks hold 80 per cent of all Australian mortgages, worth about $1.4 trillion

Real estate accounts for about 60 per cent of their loan books

Real estate has turned our banks into global money-making machines, delivering returns institutions elsewhere look upon with envy.

So, it's not too big a stretch to question — given their unconscionable behaviour in other areas — whether lending standards over property have been undermined by the insatiable demand for earnings during the property boom of the past five years.

Stories about forged loan documentation, with borrowers urged to inflate incomes, have been rife for years.

No-one, however, knows the true extent of the problem. To a large extent, no-one really wants to know.

Financial incentives result in lax lending standards

Reserve Bank governor Philip Lowe pointed to the fundamental danger spot within our economy last week; weak wages growth and hugely indebted households.

And during the past year, the RBA and the banking regulator, APRA, have worked hard to scale back risky lending from our institutions.

But neither he nor anyone else for that matter are willing to state the obvious — that financial incentives to bank employees and brokers have resulted in lax lending standards that have pushed our real estate to unsustainable levels and created a potential flashpoint for the economy.

Articulating that could be enough to light the fuse that everyone pretends simply doesn't exist, and it may well be that property misdeeds will escape the full glare of the commission.

The draft terms of reference for the royal commission, released this morning, include references to superannuation but fail to mention anything about real estate.

In fact, the only reference to property, oblique though it is, is that the commission specifically cannot look into what is known as macro-prudential controls — policies that have been implemented by the regulators to put a brake on property loans.

There are a couple of other specific carve-outs as well. The commission cannot replicate any other inquiry and it is not to delve into the adequacy of our regulators.

At first glance, it would appear the banks have managed to at least partially contain the potential fall-out.

The plunging share prices this morning will give ammunition to those arguing against a full inquiry, that such a probe will hurt earnings.

But if earnings are threatened by increased scrutiny, if our banks' super-normal profits have been generated by activities and behaviour they would prefer to remain hidden, surely that is reason enough for a full investigation.