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“I’m just worried out of all of this that very important risk equation could for political reasons and other reasons get misaligned, and if that if that is the case that could be very bad for the community and the banking industry.”

Mr Corbett added: “It would be unfortunate if it became a political element in the election because this is a very important royal commission for the future prosperity of our community.”

Former ACCC chairman Allan Fels – a former proponent of vertical integration and also the man responsible for major reforms to executive pay – says the task of implementation will be nearly impossible for government.

“We’ve opened the biggest economic can of worms since federation,” Professor Fels said.

We’ve opened the biggest economic can of worms since federation.

Professor Allen Fels

Professor Fels said Commissioner Hayne could recommend some radical structural solutions to lessen misconduct including stopping the banks from offering financial advice while also supplying products and creating official oversight of bank remediation programs and stamping out all commissions and bonuses.

But he warned such changes would be very difficult and could easily become a “political football”.

“The remuneration question is not simple. Suppose he were to recommend the drastic medicine of fee for service in place of any commissions or bonuses there would be myriad of difficult implementation challenges,” Professor Fels said.

Donal McGauchie, a former RBA board member, and current chairman of AACo said he had been horrified by some of the conduct revealed at the royal commission especially in the wealth management sector but he too warned the banks could become “gun-shy”.

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“We’re all just waiting and hoping that it doesn’t inflict too much pain on the economy because the banking system is the lifeblood of the economy,” Mr McGauchie, who is also the former chairman of Telstra, said.

“Let’s just hope that cool heads prevail -- that there is considered response from both sides of politics and there’s not too much politics played around it, that the banks themselves don’t over-react by becoming too conservative and that the regulators act sensibly as well.”

Wesfarmers and AGL director Diane Smith-Gander said the royal commission had already caused banks to become more cautious in their consumer lending, which was causing an "uncomfortable adjustment."

Although some banks had more appetite to lend to business, the greater caution towards consumers could have a "disproportionate" impact on groups in society who tended to find it harder to access credit, including lower income earners, Indigenous people, and first home buyers.

Ms Smith-Gander said government should consider this in responding to the royal commission, and not be too "prescriptive" in telling banks how to improve.

"I think the impact of the royal commission has already been felt well ahead of the final report," she said.

"We're in this uncomfortable adjustment period, and what I hope is that the government does what it should do when there are adjustments and changes in markets, that they look to ensure that people don't get disadvantaged.