The industry has been hit by a series of scandals in recent years, including the mis-selling of loan insurance, which has already cost the industry more than 26 billion pounds ($41 billion) in compensation, but the chairman of the Financial Conduct Authority said the banks understand the need to change.

"I think the retail banking sector in the UK has really got it," John Griffith-Jones told the British Bankers Association's retail banking conference.

"I think every chief executive and chairman wants to improve culture, but it doesn't move overnight, so it's a slightly dangerous situation where, to the outside world, it appears nothing is happening," he said.

Griffith-Jones' comments were echoed by Caroline Wayman, chief executive of Britain's Financial Ombudsman Service, which steps in when customers and their banks are in dispute.

"I hear things from the top that I think are encouraging and I start to see examples of that in the real world. I think that it takes times because individuals in organisations take time to believe that senior management mean it," she said.

The industry has continued to confront problems in relation to misconduct. Britain's biggest retail bank Lloyds (>> Lloyds Banking Group PLC) for instance was fined 117 million pounds by the financial regulator this month for failings in the way it handled complaints about mis-sold loan insurance.

Barclays (>> Barclays PLC), Royal Bank of Scotland (>> Royal Bank of Scotland Group plc) and HSBC (>> HSBC Holdings plc) have also been embroiled in various controversies including the mis-selling of complex hedging products to small businesses.

(Editing by David Holmes)

By Matt Scuffham