Hundreds of bank workers have struck at the “heart” of why the banks have been allegedly ripping off customers: the spectre of conflicted remuneration.

The Finance Sector Union (FSU) made a submission on Friday to the Sedgwick review recommending that all bankers “from the top down” be banned from recommending financial products that contribute to their own pay cheques.

The submission grew out of a survey of 1,298 bank employees conducted between 11 and 26 August. The responses were overwhelmingly critical of pay based on the selling of products to the public.

“The federal government should step in to ban conflicted remuneration from the industry from the top down, including from executive ranks, because our members have told us loud and clear that this is at the heart of the problems faced by bank employees and consumers,” FSU acting national secretary Geoff Derrick said in a statement.

“FSU members believe the existing remuneration systems are causing the industry harm, generating poor customer outcomes and undermining trust and confidence in the industry.”

Almost half of bank workers surveyed said they had seen a customer get a poor outcome because of performance targets. Photo: Getty

Sales targets and commissions are rife in the banking industry. It is a remuneration model that arguably incentivises employees to act against the best interests of customers — as anonymous whistleblowers within the banking industry have revealed.

Two-thirds (71 per cent) of bank workers that filled out the FSU survey agreed that product and performance based pay had undermined public trust in their industry, and 48 per cent said they had personally witnessed a poor customer outcome caused by performance targets.

“The relentless pressure applied to bank staff to continually push products and services to consumers in order to satisfy the sales targets set by senior management must end,” Mr Derrick said.

A further 20 per cent said their employer knowingly allowed staff to engage in conduct that might amount to a breach of ethical standards or responsible lending obligations — and 27 per cent said they had either witnessed or personally engaged in unethical behaviour. And almost a fifth (17 per cent) said they had been asked to do something unethical.

Conflicted remuneration is a hot topic in the world of finance. Recently, British investment fund Woodford Investment Management abolished bonuses and commissions because, according to its founder Neil Woodford, these types of remuneration can lead to “wrong behaviours”.

The FSU argues that bank employees are as much victims of misconduct as customers. For example, Mr Derrick said the pressure to achieve sales targets was causing stress and “severe” medical issues among some bank workers.

Below are some of the tactics bank workers alleged to the FSU that they are pressured to use:

A ban on conflicted remuneration for bankers would mirror the Future of Financial Advice (FoFA) reforms implemented in the financial planning industry.

Labor implemented the FoFA reforms from 2012. The regime was then amended by the Liberal-Nationals in 2014. The Turnbull government also enforced tougher education requirements in 2015, which will come into force from July 2017.

“The FoFA reforms are cleaning up financial advice and it’s now time to extend that principle to the entire financial services sector,” the FSU’s Mr Derrick said.

“This would bring debt related products like loans and credit cards into line with changes to the rules now governing the behaviour of financial advisers on savings and investment products and give consumers an added level of protection.”

The Sedgwick review to which the FSU made its submission is being conducted by the Australian Bankers’ Association. It is one of three internal reviews set up by the banking sector in response to a string of recent banking scandals.

The Labor party is calling for a royal commission into the bank sector — a move the Liberal-National government has opposed.

Several Liberal politicians have suggested instead the creation of a permanent bank tribunal to hear complaints from aggrieved customers. This proposal is being considered by the government’s Ramsay review.

Read the FSU submission in full below: