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* Govt vows to take action on all of commission's recommendations
* Royal Commission revealed widespread financial wrongdoing
* Bank stocks rise ahead of report's release (Adds quotes, details on report, graphic)
CANBERRA, Feb 4 (Reuters) - Australia's corporate regulators will be subjected to a new oversight body in a shake-up of the banking sector recommended by a high-powered independent inquiry into financial sector greed and malpractice.
The government-appointed inquiry known as a Royal Commission also recommended prosecutions for 24 cases of wrongdoing and advised that remuneration structures across the industry be overhauled to remove systemic conflicts of interest.
Authorities were urged to consider laying charges over behaviour such as the charging of fees for services not rendered, including instances at major lenders Commonwealth Bank of Australia, National Australia Bank Ltd and Australia and New Zealand Banking Group.
The commission's recommendations were released by the government on Monday after the public inquiry heard 11 months of shocking revelations of wrongdoing which wiped A$60 billion ($43.5 billion) from the country's top finance stocks.
Misconduct reached into the sector's upper echelons, with top wealth manager AMP Ltd engaging in board-level deception of a regulator over the deliberate charging of customers for financial advice it never gave.
The firms were found to prey on some of society's most vulnerable customers, highlighted by the case of an insurer who used aggressive sales techniques to sell an opaque product to a young man with Down Syndrome.
"The price paid by our community has been immense and goes beyond just the financial," Australian Treasurer Josh Frydenberg said as the government promised to take action on all 76 recommendations.
"Businesses have been broken, and the emotional stress and personal pain have broken lives."
The recommendations also include banning trailing commissions for third-party mortgage brokers, forcing financial planners to disclose any fees they receive for selling products, and banning banks from charging default interest for farm businesses affected by drought.
Regulators also needed greater oversight after they were accused of working too closely with the banks. When misconduct was revealed, it either went unpunished or the consequences did not reflect the seriousness of what had been done, the inquiry found.
BANK SHARES RISE
Ahead of the report's release, which came after the close of market trading in Sydney, shares in the "Big Four" banks closed up about one percent as investors looked forward to some certainty around the new regulatory framework.
However, wealth managers, whose reputations were shredded in the inquiry, were punished with IOOF Holdings Ltd stock closing down 4.5 percent and AMP sliding to a record low. The broader market closed 0.5 percent higher.
"The key macro issue we have been interested in is if this was going to further reduce the banks' willingness to lend, which would be a further headwind to the economy which is already under some pressure," said Andrew Ticehurst, a strategist at Nomura.
"At this stage, it does not appear to be the case. It would be a bit milder than expected."
Fallout from the Royal Commission has already prompted banks to tighten lending practices in their core mortgage businesses, contributing to some of the biggest housing price falls in a generation.
The report comes ahead of an election expected in May in which falling house prices could be a hot-button issue.
The conservative government, which for months defended the banks and rejected calls for an inquiry, is fighting for its survival with opinion polls suggesting an election victory for the centre-left Labor party.
Labor says it expects to adopt all the commission's recommendations.
While Prime Minister Scott Morrison has also said he will take up the recommendations, he has warned against overreaching and cutting off credit flows.
The report from Commissioner Kenneth Hayne, a former High Court justice, found that the industry's problems were exacerbated by an unwillingness to accept responsibility.
"That is, there remains a reluctance in some entities to form and then to give practical effect to their understanding of what is ethical, of what is efficient, honest and fair, of what is the right thing to do," the report said.
National Australia Bank Chairman Ken Henry came in for particular criticism after appearing dismissive during his public interrogation by the commission's barristers.
"I thought it telling that Dr Henry seemed unwilling to accept any criticism of how the board had dealt with some issues," Commissioner Hayne wrote, adding he was "not as confident as I would wish to be that the lessons of the past have been learned".
Australian Banking Association chief Anna Bligh said banks "accept full responsibility for these failings and they know that they must now change to ensure that this never happens again".
"Banks are determined to learn the lessons, to fix the problems and to make it right," she said.
($1 = 1.3808 Australian dollars)
(Reporting by Jonathan Barrett and Swati Pandey; Additional reporting by Byron Kaye, Paulina Duran and Tom Westbrook; Editing by Stephen Coates)