The banking watchdog insists it is already changing after an independent review found it was too secretive, unwilling to challenge itself and slow to respond to problems.
Staff at the Australian Prudential Regulation Authority anonymously criticised leadership for not forcefully taking on financial institutions and struggling with culture and governance.
But APRA's chair Wayne Byres insists his organisation is already changing, and he played down concerns about the culture that allowed banks to rip off Australian customers.
Former consumer watchdog boss Graeme Samuel led the review after the regulator was slammed in the banking royal commission and in a Productivity Commission report.
"APRA appears to have developed a culture that is unwilling to challenge itself, slow to respond and tentative in addressing issues that do not entail traditional financial risks," the report says.
"APRA needs to shift the dial towards a more strategic and forceful use of communication to ensure that it maximises its impact with regulated entities."
The report also says a division entirely focused on superannuation is needed, to oversee how the system performs for its members.
Mr Byres said APRA was already dealing with changes, but argued the organisation needs more funding if it is to handle the expectations of the community.
"It does quite fairly make the point that we have more to do. We need to go further and faster in many areas," he told reporters on Wednesday.
Anonymous staff told the review that APRA should be more forceful in taking on financial institutions, and others felt like managers wouldn't back them, but Mr Byres played down those concerns.
"Getting the range of comments that you see here, it's not unexpected, there's always a range of views in APRA," he said.
Centre Alliance senator Rex Patrick said Mr Byres should step down from his role after five years in charge.
"When you earn $886,000 you have to be the best in the game, full stop," Senator Patrick said.
"For far too long there has been a great reluctance for senior officials in the public sector to accept personal responsibility for the failures of performance."
All of the report's 24 recommendations have been accepted, including 19 for the regulator and five directed towards government.
Recommendations for the government include reviewing the adequacy of APRA's penalties and giving it the power to appoint someone to undertake reviews.
Financial Services Minister Jane Hume refused to directly criticise APRA, which she said was an "impressive and forceful" regulator of traditional financial services.
"But it does need to do some work in the areas of superannuation and new parts of the financial sector," Senator Hume said.
Shadow treasurer Jim Chalmers said the recommendations are a step in the right direction, but more needs to be done right across the board to restore confidence in the finance sector.
Australian Associated Press