Australia's banks have agreed to a new code of conduct that clamps down on easy access to household credit and promises better fee transparency.

They are seeking to improve practices ahead of a broad inquiry into the scandal-hit sector next year. 

Under the new code, the banks have committed to writing contracts in easy-to-understand terminology, a ban on unsolicited credit card increase offers and restrictions on how customers' credit limits can be determined. 

They will also inform customers about service fees as soon as they are incurred.

The Australian Bankers' Association (ABA) initially called for the code in July 2016, with the sector hoping to fend off a Royal Commission - a wide-reaching public inquiry with the power to compel witnesses and recommend criminal charges. 

With a Royal Commission now decided in the wake of mounting political pressure, the hope is that the new code will help improve the public's perception of the industry while it is underway.

It will also be reviewed by the 12-month long inquiry. 

Scandals that have hit Australia's big banks - some of the most profitable in the world - include using outdated medical definitions to avoid life insurance payouts. 

Commonwealth Bank of Australia is also facing a civil lawsuit from the federal anti-money laundering agency, which accuses it of enabling more than 50,000 payments of criminal proceeds among other allegations.

The bank has said the payments occurred but has blamed a computer glitch. It has also admitted to lacking proper monitoring and controls but denied other allegations. 

Advocacy group Consumer Action Law Centre said the new code did not go far enough.

In line with other efforts to improve public sentiment towards the sector, all of the country's "Big Four" banks have cut ATM fees, while some have also reduced international money transfer fees for foreign currencies.