Barnaby Joyce has admitted he was "naive" to argue against a banking royal commission, calling the revelations of financial misconduct "disturbing".
The former Nationals leader was deputy prime minister when the Federal Government repeatedly refused to call a royal commission. A commission was eventually called late last year.
Troubling evidence of misconduct in the scandal-plagued banking sector has since emerged, including that the charged deceased clients advice fees.
"I have apologised for being so naive to have swallowed their (the banks') line of 'we are good corporate citizens'. Maybe they should now as well," Mr Joyce told Fairfax on Thursday.
He also questioned whether Australia's banks should be broken up to avoid conflicts of interest.
"They should consider whether they should be in the financial planning business after the evidence delivered. It appears from evidence to be too much of a conflict of interest and a temptation for them," he said.
Mr Joyce's comments come a day after he tweeted that the hearing's findings have so far been "disturbing".
"In the past I argued against a Royal Commission into banking. I was wrong. What I have heard is so far is beyond disturbing," he wrote.
Questions over timing of bank commission
Meanwhile, Scott Morrison again warned the "despicable behaviour" recently uncovered by the banking royal commission carries jail sentences under federal law.
"This type of despicable behaviour does carry jail sentences under the Corporations Act," Mr Morrison warned on Thursday.
"We're getting on with making sure the penalties are up to scratch, to see what additional improvements can be made."
The treasurer also defended the government's previous decision not to rush into a royal commission, as Labor had demanded, pointing to the recent introduction of its banking executive accountability regime and more funds to strengthen the powers of the Australian Securities and Investments Commission.
"Now the royal commission is now underway, (and) we ensured that it had broader terms of reference," Mr Morrison said in Geelong.
The commission is not just looking at the major banks, as Labor initially proposed. It's also eyeing misconduct in the superannuation and financial services industries, including insurance.
Federal Treasurer Scott Morrison. Source: AAP
But Opposition Leader Bill Shorten wants Prime Minister Malcolm Turnbull to apologise for opposing a royal commission for two years.
"Even when he finally relented and allowed it to go ahead, Mr Turnbull called the royal commission 'regrettable'," Mr Shorten told AAP.
"The only thing 'regrettable' about all of this is that this disgraceful behaviour has gone on for so long and that this royal commission didn't start sooner."
Finance Minister Mathias Cormann indicated the government would be open to extending the inquiry beyond its current deadline, which is to provide a final report by February 1 next year.
"If the royal commissioner (Justice Kenneth Hayne) says to us that there is more work to be done, that he needs more time, then obviously the government would act on that," he told 2GB radio.
This week's extraordinary and damning evidence saw a number of MPs and financial market commentators opposed to the inquiry do an about-face.
Asked if "dodgy bankers' should go to prison if they broke the law and ripped off customers, Financial Services Minister Kelly O'Dwyer said: "Absolutely".
