Commonwealth Bank chief executive Ian Narev says a royal commission into the banking sector could undermine it to such an extent that the industry would no longer be able to support job creation through its lending.
Mr Narev told a parliamentary hearing on Tuesday that a royal commission would hit confidence among overseas lenders upon whom Australian banks rely for funds.
Those funds, Mr Narev said, are what banks loan out to "create the economic activity that will create jobs".
"The message that the convening of a royal commission would send about policymakers over the last decade, regulators over the last decade, bank management and governments over the past decade would not be positive for the industry, would not be positive for strength and would not be positive for the perception of our industry as unquestionably strong," Mr Narev told MPs.
"Those of us who spend a lot if time with funders and with investors will understand the signal that would send about the confidence that we have in policymakers, in regulators and in banks ... and we believe that would be very damaging to the industry."
Labor frontbencher Matt Thistlethwaite told Mr Narev that the banks had already damaged the industry.
"You guys have done a pretty good job of destroying confidence in the banking industry over the past decade, haven't you?" Mr Thistlethwaite asked.
Mr Narev - making his second appearance in six months before the standing committee on economics' review of the big four banks - paused before saying only that he had made clear his thoughts on a royal commission.
Mr Thistethwaite said Tuesday's hearing illustrated the need for the extended powers of a royal commission.
"Nothing has changed in the industry ... there are customers that continue to be ripped off, and they won't co-operate with the House of Representatives economics committee," Mr Thistlethwaite told reporters after the hearing.
"This is all evidence that they're hiding something from the Australian public."
Mr Narev echoed comments by NAB chief executive Andrew Thorburn - who appeared last week - when he rejected suggestions that the Australian Competition and Consumer Commission should have some oversight of banking competition.
Mr Narev said the 2014 Financial System Inquiry, which was led by former CBA chief executive David Murray, had already decided that oversight of banking competition should rest with the productivity commission.
"What has happened since all that work was done by the financial systems inquiry which could cause us to reach very different conclusions?" he asked.
Nonetheless, CBA's head of retail banking, Matt Comyn, said the lender would abide by any recommendations by former Australian Public Service Commissioner Stephen Sedgwick in his current review into retail banking remuneration and commissions.
"Both us as the Commonwealth Bank and the broader industry have already said that, if there is evidence of negative customer outcomes, we will make the appropriate changes to any of our incentive schemes," Mr Comyn said.
