The budget's executive pay regime for senior bankers will do little to lift accountability, or achieve more "balanced" pay outcomes, says banking veteran Phil Chronican.

Mr Chronican, a non-executive director of National Australia Bank, on Friday agreed that change was justified in how executives were paid, and Australia could play a "global leadership role" in this area.

His chairman, Ken Henry, has also pointed to excesses in executive pay, saying boards around the country were saying "enough is enough" when deciding on executive remuneration.

However, Mr Chronican said the answer was not the budget's "arbitrary" rule that a minimum of 40 per cent of senior executive banker pay must be in shares, and 60 per cent for bank chief executives, which would be deferred for at least four years.

"I actually am disappointed that these issues have been used in this way, as if they were some kind of punishment for the industry," said Mr Chronican, previously a top banker at ANZ Bank and Westpac.

"Actually there is a real opportunity here for us to think about improving the way Australian business operates, within the framework of stronger personal accountability and much more balanced remuneration systems," he said at the Australian Retail Banking Summit in Sydney.

"Arbitrary rules imposed in the heat of the budget aren't likely to lead to the best outcomes.

"So I would hope that in a less heated environment, you can actually have a more rational public dialogue on how Australia might take a leadership position globally in looking at senior executive remuneration and senior executive accountability."

Some politicians have been dismayed at the lack of punishment of senior bank executives in recent years, despite a run of scandals. In announcing the budget measures on pay, to be enforced by the Australian Prudential Regulation Authority, the government said it would hold bankers accountable when they did not meet expectations.

Mr Chronican said investors and banks were already working through a range of questions relating to executive pay and accountability, an area where he said there was "fertile ground".

"Yes there needs to be deferral, yes there needs to be a mix of equity and cash compensation, yes it has to be across a balanced scorecard, but that's something that will emerge in industry practice," he said.

"Plucking two numbers out of the air and saying they're going to be a cornerstone of it doesn't actually address the issue."

Speaking about bank culture, Mr Chronican also suggested banks had been too defensive in dealing with scandals in recent years. He highlighted the risk of "corporate pride" blinding leaders to serious problems occurring under their watch.

In hindsight, Mr Chronican said banks should have acted earlier to stamp out commissions paid to frontline staff selling products such as loans, credit cards, and insurance.

The Future of Financial Advice rules of 2013 only banned commissions paid to financial advisers, not bank tellers, in part because banks argued retail banking was different.

"With the benefit of hindsight now, if we'd stepped back and thought about it, maybe we should have extended the principle and said most product-based sales potentially lead to bad outcomes," he said.

Lenders have now agreed to cut sales commissions for frontline staff, after a review from former public servant Stephen Sedgwick.

Mr Chronican also launched a strong defence of the banking industry's move towards "soft targets" for executive pay, which link bankers' bonuses to metrics such as customer satisfaction, as well as returns.

Proxy advisers have criticised the trend, but Mr Chronican said basing executive pay purely on financial returns could give executives the incentive to target short-term profit by raising prices for existing customers, or cutting marketing spending, rather than trying to expand their business.