Amid ongoing debate on stricter policies, Commonwealth Bank of Australia (ASX: CBA) chief executive Ralph Norris today warned politicians that over-regulation of the banking sector could hinder competition.

Labor and the Coalition sought to outbid each other on proposals to boost competition
Greens while Bob Brown wants to restrict Aussie banks in lifting interest rates beyond the Reserve Bank levels.

But Mr Norris told an Australian British Chamber of Commerce lunch in Melbourne that politicians should be careful about unintended consequences.

"Typically in any industry, regulation, if not well thought out, creates a barrier to entry," he said.

Mr Norris also said "a lot of the accusations and criticisms" on competition "are pretty much fact-free".

"I don't think you have seen as much competition between the majors in the last year or two as you have seen in the history of the majors," he said.

The Big Four have suffered severe criticisms for lifting rates while posting record earnings this financial year. However, Mr Norris played down profits, saying the banking sector is not doing as well as some other industries.

"Yes, the numbers are large, but the businesses are large. But when you look at it on a normalised basis of ROE, the returns in the banking industry are not much more than half than what they are in the mining industry or in some segments of the retail industry in particular," he said.

The highest-paid banking chief executive also defended his remuneration of just over $16 million this year.

"I don't determine my pay package. I have certain performance hurdles that are put in place. My payroll or my package has been voted on by our shareholders for the last four or five years, and in every instance, the shareholders have approved my remuneration by over 90 per cent. So, I don't have anything further to add," Mr Norris said.