Banks will no longer pay sales-based bonuses to retail staff after an independent review recommended an overhaul of the way employees are remunerated.
The review by former Australian Public Service Commissioner Stephen Sedgwick delivered 21 recommendations, including the scrapping of incentives based directly or solely on sales performance.
Other recommendations, which the big four banks and Australian Bankers' Association have pledged to adopt, include ensuring mortgage brokers' payments are not linked to loan sizes.
"Mr Sedgwick has not only identified that remuneration arrangements need to improve, but also that it needs to happen alongside a change in culture and approach from management," Australian Bankers' Association chief executive Anna Bligh said.
"This will not be easy for banks and there will be challenges."
The review did not recommend completely banning rewards for sales, but replacing them with measures where sales represent no more than one third of the consideration for incentive payments by 2020.
Lenders including Commonwealth Bank and National Australia Bank had already committed to implementing Mr Sedgwick's recommendations.
They reiterated their support on Wednesday.
"We want our customers to be confident that every time they deal with their bank, they are receiving products and services that best suit their needs," NAB chief customer officer Andrew Hagger said.
Industry Super Australia welcomed the review but warned it would not stop banks cross-selling their own superannuation products.
Industry Super Australia chief executive David Whiteley said cross-selling of super to banking customers through general advice should be tested to ensure consumers are not disadvantaged.
"It is a tall order to ask staff to both meet sales targets and genuinely serve customer needs when the products they are required to sell are designed to generate revenue and therefore may not be the best on offer," Mr Whiteley said.
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