Australia's four major banks are about to enter a new era of supervision that will see the corporate regulator monitor executive decision-making as it happens instead of through a rear-view mirror.The Turnbull Government yesterday unveiled an important building block of an emerging regulatory framework that will eventually consign more than three decades of self-regulation in the financial services sector to history.The government has swiftly adopted a plan devised by new ASIC chair James Shipton to install up to 20 regulatory supervisors in each of the major banks and AMP.Shipton's rationale for taking ASIC inside the banks is essentially to save bankers from themselves by short-circuiting business decisions that could lead to misconduct and consumer harm.The ASIC boss has borrowed the idea from supervisory practices in the United States, the United Kingdom and Hong Kong where he previously worked as a senior regulator."We will have supervisory officers embedded for significant periods of time inside these large financial institutions because I know it makes a difference to the way they behave," Shipton said yesterday."I know it makes a difference to the way decisions are made."I know that it will make real, positive outcomes, when it comes to the way financial institutions should treat customers." Case studies presented to the Hayne Royal Commission indicate some of the country's largest institutions have actively misled ASIC about the levels of non-compliance and misconduct in their organisations.The evidence, particularly in the hearings on 'fees for no service', has obliterated public trust in the sector.The federal government, which tenaciously shouted down calls for a royal commission for five years, is now throwing lashings of cash at beefing up the powers and ranks of regulators in a belated effort to rebuild the financial sector's public standing.In the May Budget Treasurer Scott Morrison defended his decision to cut ASIC's funding by A$28 million even as the early hearings of the Hayne Inquiry were unearthing appalling cases of misconduct and dysfunction across the industry.Yesterday, Morrison shelved his penny-pinching habit and pulled out an extra $70 million to fund the expansion of ASIC's activities."I think there has been a growing challenge on our regulators to be able to have the right culture, the right approach and the resources to get about that job," Morrison said."As a cop on the beat, you need to walk softly and carry a big stick."There's an important question that the treasurer needs to address in light of the observations he makes in these comments.If the "resources" have been required to deal with what Morrison describes as a "growing challenge", then why was ASIC's budget sliced only three months ago?The government could pay a price at the ballot box for shielding the banks from public scrutiny for so long and constraining the regulator's funding for several years.These issues might overshadow the merits of putting competent ASIC staff at the coalface of an industry that is now on its knees and looking almost helpless.