David Murray, who led the government's financial system inquiry, says ASIC intervention on banking culture would reduce competition in the sector.
The former Commonwealth Bank chief executive says he regrets invoking Hitler when he criticised the corporate watchdog this week, but said making company directors legally responsible for poor corporate culture would be anti-competitive.
"I used some extreme language about that, which I regret, but it will not work," Mr Murray told ABC radio on Thursday.
"In a sense, the guidance notes that ASIC will produce about culture will become the single culture of everybody and that's not desirable in a vibrant market."
Mr Murray this week said "Adolf Hitler springs to mind" when he thought about widespread attempts to enforce a single culture.
News that makes sense
Your trusted source for staying up-to-date with the world around you. Get free daily news updates and analysis, straight to your inbox.
He said it was up to each bank to determine its own culture rather than to have a set of values imposed upon them.
"It is anti-competitive, it is counter-productive and it is easily capable of abuse," Mr Murray said.
"The reason for that is the distinctive culture of one organisation is part of its competitive advantage and you can't regulate for attitudes."
The banks are in the spotlight following a series of scandals, the most recent of which is Australia's Securities and Investments Commission's decision to start Federal Court proceedings against Westpac and ANZ for alleged manipulation of a key interest rate.
Both banks deny any wrongdoing.
Prime Minister Malcolm Turnbull told a Westpac event on Wednesday that every bank in Australian needed to ensure customer interests were put first at all times.
"The singular pursuit of an extra dollar of profit at the expense of those values is not simply wrong but it places at risk the whole social licence, the good name and reputation upon which great institutions depend," the prime minister said.
Mr Murray said action by the banks to address their systems - such as rewarding correct culture through appropriate remuneration and promotion - was the way forward.
"You can't write down a set of values, put down the pen and think that everything will be OK," Mr Murray said.
"You've got to pursue it in the systems of an organisation and that's hard work."
