The large banks and AMP will be required to fund the establishment of a new independent body to oversee the professional standing of the much-criticised financial services industry, the government has announced.

The chairman and directors of the body, a Commonwealth company, will be appointed by the government, which will develop an ongoing industry funding model for it.

But the new professional standards regime for the industry will not start until 2019 and will take until 2024 to be fully operational.

The latest moves to boost the industry’s professional standards have been announced by the Minister for Financial Services and Revenue Kelly O'Dwyer ahead of an Australian Securities and Investments Commission (ASIC) report that further documents malpractice by the banks and AMP. The Australian Financial Review reports that it reveals they “have been shortchanging tens of thousands of customers tens of millions of dollars by charging them for services they didn’t receive”.

O'Dwyer foreshadowed action on professional standards in April but it fell by the wayside with the election. Given Labor’s urging of a royal commission into the banks, which has community support, the pressure on the government to respond has intensified.

O'Dwyer said legislation would be introduced into parliament this year to mandate professional standards for advisers.

They will include compulsory educational requirements for both new and existing advisers; supervision requirements for new advisers; a code of ethics for the industry; an exam that will be a common benchmark across the industry; and ongoing professional development.

The new standards regime will not commence until January 1 2019, and existing advisers will have until January 2021 to pass the new exam and until January 1 2024 to reach degree-equivalent status.

The standards body will develop and set the industry exam as well as the ethics code and determine the education and development requirements for both new and existing advisers.

Professional associations and other independent third party monitoring bodies will develop compliance schemes to monitor and enforce advisers’ adherence to the code. These compliance schemes will be approved by ASIC.