Malcolm Turnbull has today announced a royal commission into the banking sector after the big four banks wrote to the PM requesting the inquiry.

A letter addressed to federal Treasurer Scott Morrison and signed by the chairpersons and CEOs of ANZ, CBA, NAB and Westpac, said the move was in the "national interest".

"Our banks have consistently argued the view that further inquiries into the sector, including a royal commission, are unwarranted," the letter said.

"However, it is now in the national interest for the political uncertainty to end."

Mr Turnbull took no time signing off on the royal commission despite repeatedly rejecting the idea, deeming it to be the only way to restore the public's faith in the banking sector.

"Since the financial crisis, there have been examples of misconduct by financial institutions. Some of them extremely serious. And that's demanded a response from the institutions themselves and from government," Mr Turnbull said.

"The only way we can give all Australians a greater degree of assurance is a royal commission into misconduct into the financial services industry.

The only way we can give all Australians a greater degree of assurance is a royal commission into misconduct into the financial services industry.

"It will cover the nation's banks, big and small, wealth managers, superannuation providers, insurance companies. It will be a comprehensive inquiry."

The royal commission will run for 12 months with a final report due by February 1, 2019.

In response to the announcement, opposition leader Bill Shorten said: "Turnbull has always been – and always will be – on the side of the banks."

"It says everything about Turnbull's values and priorities that he only agreed to Labor's royal commission when the banks told him he had to," he said in a statement.

"He ignored the pleas of families and small businesses, he rejected the words of whistle-blowers. But when the big banks wrote him a letter, he folded the same day."

Meanwhile social media users have been quick to ask "who is pulling the strings?", as Mr Turnbull seemingly bows to the wishes of the big four financial institutions.