National Australia Bank boss Andrew Thorburn says his bank stopped giving money to Australian political parties "to be clean" and to avoid public perceptions of impropriety or graft.
Appearing before a parliamentary inquiry into the banking sector on Thursday, Mr Thorburn said NAB made the landmark decision in order "to be respected as a bank and as a company".
But he also tacitly acknowledged the big banks did not need to make political donations for goodwill, noting "we have good relationships with all political parties anyway".
"In essence, we felt that the donations we were making to political parties were being misconstrued, misinterpreted incorrectly," Mr Thorburn said. "We felt that to be clean, direct and decisive, our board decided to stop making such political payments."
The board's move, made quietly in May but revealed by Fairfax Media on Wednesday, has sparked a fresh debate about the role of political donations, particularly by large companies.
The big banks have given close to $5.5 million to the two major parties over the past decade, in the form of cash donations and payments for attendance at glitzy fundraisers or dinners.
Left-wing activist group GetUp! labelled Westpac the "worst offender" of the Big Four, as records show it gave $1.8 million to the Coalition and Labor between 2004-05 and 2014-15.
Like the Commonwealth Bank, Westpac does not make cash donations but it does pay to attend political events, where tables with a cabinet minister can cost upwards of $10,000.
Westpac boss Brian Hartzer defended the bank's policy, which he said was "open and transparent".
"Our policy is very clear and we don't have any plans to change it," he told the inquiry. "We don't make cash donations to political parties but we do engage in the political process."
But GetUp! campaign director Natalie O'Brien said that if banks truly wanted to preserve the integrity of the political process "they should keep their big-dollar donations out of politics" altogether.
Chief executives of the Big Four were hauled before a parliamentary inquiry in Canberra this week to examine a number of scandals and unscrupulous practices in the sector, among other things.
Mr Thorburn acknowledged community concerns about political donations being used for unsavoury purposes, and indicated NAB did not need to donate to cultivate political relationships.
"Our bank is a large bank. We have good relationships with all political parties anyway," he said in response to questions from Greens MP Adam Bandt.
"So we are going to use our credibility, and strength and currency as a bank, not have it potentially misconstrued that payments were being made for any untoward reasons."
At Wednesday's hearing, ANZ boss Shayne Elliott said his bank was reviewing its policy on political donations. ANZ has given $1.65 million to the major parties since 2004-05.
Mr Bandt called on Labor and the Coalition to stop accepting donations from the Big Four banks. Asked about the matter this week, Opposition Leader Bill Shorten said it was a matter for the ALP's administrative wing.
