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Bankers could face up to 10 years’ jail for misconduct under beefed up penalties that have passed the first green light of federal parliament.

The legislation which passed the lower house on Thursday increases jail time for individuals found guilty of misconduct in the financial sector to up to 10 years.

Civil penalties will also increase fivefold ($1.05 million fine) for individuals and tenfold ($10.5 million fine) for corporations.

‘It’s giving a very clear message to financial institutions and individuals that complying with the law is actually not negotiable,’ chief government whip Nola Merino said during the debate.

‘It is the law and if it’s breached the courts will have a broad range of penalties to impose.’

Labor lost its bid to increase maximum jail time to 15 years, and to remove a cap on civil penalties for corporations.

Assistant Treasurer Stuart Robert argued the penalties were already being substantially increased, accusing Labor of political point scoring.

The opposition’s financial services spokeswoman Clare O’Neil spoke of harrowing tales she had heard during Labor’s roundtable meetings with victims of banking misconduct.

Financial stress caused by such misconduct has led to marriage breakdowns, while those with mental health conditions were taken advantage of, she added.

‘There has got to be people held to account for the type of conduct that’s been seen.’

Labor MP Milton Dick said he saw people with tears in their eyes over the lack of compassion shown to them by the banking sector.

Greens MP Adam Bandt supported Labor’s attempts to boost criminal penalties, and told the chamber his Senate colleague Peter Whish-Wilson would introduce amendments to the bill.