Banks to review product sales commissions, remove bad apples To...

• Banks to review product sales commissions, remove bad apples
• To also support whistle-blower employees
• Plan to take effect immediately
• Australian shares among worst performers on the index

(Adds details about the measures, analyst comment, industry context, shares)

Australia's biggest banks on Thursday promised unprecedented reforms to protect consumers and boost transparency following revelations of misconduct and ahead of a federal election set to be fought partly over calls for tougher sector oversight.

The package includes reviewing product sales commissions, supporting whistle-blower employees and removing individuals from the industry for poor conduct, the Australian Bankers Association (ABA) said in a statement.

The politically charged announcement is the first co-ordinated industry-wide step by Australia's biggest banks to clean up their act in the wake of reputationally damaging probes into wealth mismanagement, insurance scams and benchmark interest rate rigging.

"This plan delivers immediate action to make it easier for customers to do business with banks, including when things go wrong," ABA Chief Executive Steven Munchenberg said in a statement.

Major lenders National Australia Bank (NAB), Commonwealth Bank (CBA), Westpac (WBC) and ANZ Banking Group (ANZ) pulled through the 2008 financial crisis in good shape but are now facing mounting criticism over misconduct even as they continue to deliver record profits for shareholders.

The plan announced on Thursday, parts of which are subject to regulatory approval or legislative reform, would be overseen by an independent expert, the ABA said.

It comes as political pressure is piling on Prime Minister Malcolm Turnbull to order a high-powered judicial inquiry into financial industry misconduct as he campaigns for a federal election in July.

Turnbull and the ABA have rejected calls from the opposition Labor Party for a Royal Commission into the industry, saying the existing watchdog and self-regulation are enough.

"Banks are particularly concerned that a call for a Royal Commission will send alarm signals to international investors about Australia at a time of global volatility," Munchenberg said earlier this month.

The banks' announcement came a day after Turnbull's conservative government announced reforms to beef up the powers of the markets watchdog, hoping to out-flank Labor's push for a Royal Commission.

UNDER PRESSURE The political debate is a new headache for Australia's banking chiefs who are already being forced to respond to investor concerns about rising bad debts as the commodities super cycle plumbs new lows, slowing profit growth and narrowing margins.

Australia also faces the risk of losing its coveted AAA credit rating, which could raise the banks' costs of doing business.

All this is elevating the level of nervousness for investors, particularly retail shareholders, Morningstar analyst David Ellis said.

"We have seen big bounces in the resources companies here in Australia and globally but we've not seen a big bounce in banks. It's just an unrelenting flow of bad news which is having an effect on the share price," he said.

The four big banks are among the top losers on the benchmark share index so far this year, down between 6 and 13 percent. The S&P/ASX 200 is down barely 1 percent in the period.

They were up 0.9-1.6 percent in a firm broader market on Thursday.