Federal Opposition Leader Bill Shorten has announced an incoming Labor government would hold a royal commission into misconduct in the banking and financial services industry.

Key points: Bill Shorten says "the string of scandals" in bank industry has to stop

Bill Shorten says "the string of scandals" in bank industry has to stop Turnbull Government urged by Shorten to also commit to royal commission

Turnbull Government urged by Shorten to also commit to royal commission MPs John Williams and Warren Entsch also support inquiry

MPs John Williams and Warren Entsch also support inquiry Scott Morrison stands by ASIC as a "tough cop on the beat"

Mr Shorten said the public inquiry would rebuild trust in the banks after a "string of scandals" affecting tens of thousands of Australians, and address systemic industry problems.

"Many Australians have suffered through the decisions of banks and financial institutions," Mr Shorten said on Friday.

"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.

"Today I say enough is enough. This string of scandals has to stop."

Sorry, this video has expired Opposition Leader Bill Shorten calls for royal commission into financial services sector

Labor says the Parliamentary Budget Office has predicted a royal commission would cost taxpayers $53 million over the expected two years the probe would run.

It would have the power to compel witnesses to appear, to access commercially sensitive documents and direct police to apply for search warrants.

Shadow cabinet has endorsed the move, and the Opposition Leader said the decision had not been "made lightly".

Many of the nation's biggest banks have been accused of financial services misconduct in recent years, including Westpac, NAB, ANZ, CBA, Macquarie and Bendigo banks.

Mr Shorten has called on the Turnbull Government to make the same commitment.

Coalition split on banking royal commission

Federal Treasurer Scott Morrison dismissed Labor's push as playing "complete politics" ahead of the federal election.

Mr Morrison said it was clearly designed to distract from debate about union corruption and the reintroduction of the Australian Building and Construction Commission (ABCC).

"For Bill Shorten to go down this path, I think it is a reckless distraction that puts at risk confidence in the banking system," Mr Morrison said.

But Nationals MP John Williams has long advocated for a royal commission. He said he hoped Mr Shorten's announcement would increase pressure on the Government to act.

Senator Williams said the lack of willingness from his colleagues so far had been a "disappointment".

On Thursday, Coalition MP Warren Entsch said a royal commission was critical to stop "bastard practices" by the banks.

The Australian Bankers' Association has also rejected the proposal, with chief executive Steven Munchenberg warning Labor's plan would be expensive and drawn out.

"We don't understand what this royal commission is meant to achieve," he said.

"We absolutely acknowledge that there have been too many incidences in the banking system where we have failed to live up to our own standards, let alone the standards of our customers."

He said those matters have already been subject to "incredible scrutiny" through parliamentary and industry inquiries.

The association said many of the incidences used as examples on Friday were historic, and had already been dealt with.

"We are very concerns about the signals that it sends to international investors that Australian banks, and the Australian economy relies on, to ensure that we can keep people in jobs and we can continue to fund the economy," Mr Munchenberg said.