Westpac is planning to remove a long-standing cap on banker bonuses in the latest sign lenders are willing to step away from financial services royal commission-era rules to boost profits of mortgage lending.

It would be the second bank to make a major change to remuneration, after Commonwealth Bank said it would lift the bonus it can pay home loan bankers from 50 per cent of base pay to 80 per cent, a move Australian Securities and Investments Commission chairman Joe Longo described as “very disturbing”.