APRA has conceded that it needs to do more to rein-in misconduct.

The finance regulator has also challenged the finance sector to adopt professional standards.

The banking royal commission's interim report has revealed greed often wins over basic standards of honesty and regulatory inaction, creating systemic misconduct across the financial services sector.

“When misconduct was revealed, it either went unpunished or the consequences did not meet the seriousness of what had been done,” Commissioner Kenneth Hayne wrote in his interim report.

Speaking to a Financial Services Institute of Australasia (FINSIA) forum, APRA chair Wayne Byres said both regulators and the industry should already be looking for ways to drive change.

“The royal commission has suggested, amongst other things, that regulators can and should do more to actively enforce standards of behaviour within the financial sector, and punish those who breach them,” he said.

“Based on what has been revealed, that is a quite reasonable conclusion.

“Consistent with prudential supervisors around the world, APRA has traditionally examined cases of poor conduct as an indicator of risk, but not a direct prudential risk in and of itself, unless it was likely to jeopardise the stability of the system or an individual institution.

“We will clearly need to reflect on that approach.

“Regulatory initiatives in the pipeline — accountability statements, remuneration restrictions, strengthened governance requirements, greater attention to organisational culture, and more forceful enforcement — will drive change.

“But to truly generate cultural change within the industry, the task cannot be left to regulators alone.

“There is no defined body of knowledge or high entry standards for those who perform key roles.

“Where codes of conduct exist, they are often totally voluntary.

“And on the evidence before the royal commission, the balance between self-interest, company interest and serving the community's interest has not always been appropriately struck.”