Prime Minister Malcolm Turnbull is set to toughen rules on the big four banks in an attempt to allow greater competition.

The prime minister will on Tuesday release the federal government’s formal response to the financial system inquiry, chaired by former banker David Murray.

The reform plan was reportedly agreed to by cabinet on Monday night.

The changes risk damaging the government’s relationship with the major banks over the measures which aim to cut costs for Australians.

Australian Bankers’ Association chief executive Steve Munchenberg says the government should accept the whole set of recommendations made by the inquiry, even though he doesn’t agree with all 44.

He said fund security and financial advice were the two areas where change was needed.

‘While our banking system is good, there’s always room for improvement and we accept that,’ Mr Munchenberg told ABC radio, adding that the resulting costs would inevitably fall on shareholders and customers.

Source: Sky News