The government plans to require the big banks to appear at least once a year before the House of Representatives standing committee on economics, making them the first private organisations to face scrutiny alongside the Reserve Bank and Australian Prudential Regulation Authority.

Labor rubbished the plan as toothless, as executives at the Commonwealth, ANZ, Westpac and National Australia Bank agreed to the plan.

Mr Turnbull rounded on the banks on Wednesday over their failure to pass on the full impact of the Reserve Bank's 0.25 percentage point rate cut to official rates – now at a record low 1.5 per cent.

The move sees the banks holding on to a combined total of more than $900 million that would otherwise benefit mortgage holders.

"What we're setting in place here is ongoing, permanent cultural change and change that will make the banks ensure that they are accountable and the committee will seize on this reference," Mr Turnbull said.

"It will, just as it has done with the RBA and APRA, you will get this change in culture so the banks will know then that if they decide not to pass on an interest rate cut from the Reserve Bank they will know that they're going to have to front up to a House of Representatives committee and explain that and take questions about that and justify their actions in front of the elected representatives of the Australian people."

The banks will be required to explain international economic and financial market developments and their impact on the Australian economy, developments in prudential regulation and capital requirements, the costs of funds and perspectives on domestic economic conditions.

Mr Turnbull and Mr Morrison said the government had strengthened the resources and capability of the Australian Securities and Investments Commission, which had investigative and reporting powers similar to a royal commission, as well as the ability to prosecute illegal activities within the banking and financial sector.

The government expects the committee will report at least once a year on its assessment of the evidence presented by bank bosses.

The announcement comes as Opposition Leader Bill Shorten described Mr Turnbull's response to rates cuts as "empty, weak and pathetic", maintaining his calls for a royal commission into the financial services industry.

Labor's small business and financial services spokeswoman Katy Gallagher said systemic failures in the banking sector required significant action.

"At the moment, what we've seen is just apology after apology, being seen to do something but actually coming out with a piece of wet lettuce," she said.

The big banks all confirmed they would appear before the committee. National Australia Bank's chief Andrew Thorburn said banks faced a "delicate" balancing act in satisfying borrowers, depositors, and hundreds of thousands of shareholders.

Mr Thorburn said these groups all wanted "different things," and conceded banks had not always explained their decisions well enough.

"Clearly there are some things we need to explain better, but this is a very delicate balancing act, it's got to be done carefully," he said.

Mr Thorburn said Mr Morrison had called him to discuss the plan before it was announced.

ANZ's chief executive, Shayne Elliott, conceded the inquiry was necessary - though he has also defended the bank's move to only pass on some of this week's interest rate cut to borrowers.

"I accept this is a necessary initiative in the current climate and I welcome the opportunity to represent ANZ's views and to answer the tough questions that I know will be forthcoming in any parliamentary appearance," Mr Elliott said in a statement.

Some in the banking industry expect there may still be further political scrutiny of banks after Parliament resumes at the end of this month, which could include a Labor-initiated Senate inquiry.

Westpac chief Brian Hartzer said he would appear, and there was a need to explain to the public how the costs of banks providing mortgages were changing.

"We think it's important that the public understand the real costs of providing a mortgage, and how that's changing," Mr Harzter said.

A Commonwealth Bank spokeswoman said senior executives had frequently appeared before parliamentary committees.

Australian Bankers' Association chief executive Steven Munchenberg said no other businesses were required to justify their commercial practices to Parliament.

"We are confident banks can explain why the interest rates they set for borrowers are determined largely by the costs of funds and the pressures of a highly competitive market, not the Reserve Bank cash rate," he said in a statement.

"In making interest-rate decisions, banks have to balance the needs of borrowers and savers, and shareholders in banks, most of whom are also ordinary Australians.

"The industry welcomes the opportunity to discuss the international and domestic context for banks, and how we are responding to concerns around bank practices."

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