Westpac expects the economy to recover from its current malaise in 2015, provided the Reserve Bank cuts interest rates.
Chairman Lindsay Maxsted has also rejected a call for banks to hold more capital as a buffer against economic and industry shocks.
Speaking at Westpac's annual general meeting, the last for outgoing chief executive Gail Kelly, Mr Maxsted said further rate cuts and a lower Australian dollar would fuel improvements in the economy in 2015.
The bank recently altered its interest rate forecasts to include two cuts by the Reserve Bank in the first half of 2015.
"We expect growth in the Australian economy to gradually improve in the year ahead as strengthening household finances, low interest rates, and a competitive Australian dollar boost domestic spending," Mr Maxsted said.
Economic growth has slowed in 2014 due to a slowdown in the mining sector, plunging commodity prices and weak consumer and business sentiment, leading to calls for the RBA to cut the cash from its current record low of 2.5 per cent.
Ms Kelly said the banking industry was going through its biggest overhaul in a generation due to technological changes, along with the drive for regulatory reform.
"We recognise the fundamental changes that are working their way through in the financial services industry," she said.
More changes are likely after the release of the findings of the federal government's Financial System Inquiry early this week.
A key recommendation is for banks to increase their capital reserves as a buffer against hard times.
But Mr Maxsted said that was not necessary.
"While we accept that a strong financial system is fundamental for an open economy like Australia, we believe the sector is already strong on many dimensions," he said.
"The debate has typically equated strength with capital, with less commentary on some of the broader elements of strength such as, the quality of systems and processes, and the culture of an organisation."
He also said the inquiry, headed by former Commonwealth Bank chief David Murray, failed to pay sufficient attention to how banks fund their lending.
The report is now in the hands of the federal government, which has said it will not rush in its response.
Mr Maxsted said the government's response needed to balance any proposals aimed at strengthening the banking system against the need to support economic growth.
Westpac shares dropped 19 cents to $32.05.
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