James Shipton, the chair of the Australian Securities and Investments Commission, told a parliamentary inquiry in Canberra on Friday he accepted criticism of ASIC by the royal commission.

But Mr Shipton said banks needed to take urgent action to clean up their act, as the financial industry had "abandoned its core role that of being custodians of other peoples' money".

"This dishonesty must not stand," Mr Shipton said.

"And unfortunately, whilst we are hearing important acknowledgements from leaders of financial institutions about change, such change is not happening as quickly as it should.

"ASIC is still experiencing slow and delayed responses from financial institutions and, in some cases, overly technical responses aimed at delay."

Mr Shipton said if institutions lied or were otherwise dishonest with ASIC the watchdog would use "every power available to us to punish that behaviour".

ASIC was already addressing some of the concerns raised in the royal commission interim report about it, including better use of its enforcement powers, especially against the biggest institutions.

In criticising ASIC, the royal commission found "important deterrents to misconduct are missing".

While internal changes were important, it was just as crucial for ASIC to get access to increased penalties and regulatory powers and for the government to take a fresh look at ASIC's budget, Mr Shipton said.

"Hong Kong's financial regulators are three times the size of Australia's," he said.

Australian Associated Press