The B20 financing growth taskforce led by Mr Smith recommended G20 leaders complete the Basel III banking reforms and examine them for any unintended consequences. Some rules would then need to be adjusted to ensure they are not preventing lending for infrastructure, trade finance, or to companies in emerging markets.

''The last thing we want to do is prevent access to credit, because credit actually provides growth, quite clearly,'' Mr Smith told The Australian Financial Review and B20 lunch in Sydney.

The financial crisis was not caused by insufficient regulation on banks but ineffective prudential supervision, especially in the US and Europe, he said.

''Unfortunately, the rest of the industry globally got tarred with the same brush, and therefore the response and the plethora of new regulation actually affected the industry globally and has therefore created a very thick line [of new regulations].''

The message of his taskforce had been well received by governments, he said, but the global finance industry - which has been plagued by a string of scandals including the mis-selling of insurance in Britain and the manipulation of global interest rate benchmarks - had to do more to clean up its act.

''We do need to re-establish trust in the financial services industry. Not so much here in Australia, but certainly in the US and Europe - [where] there is no level of trust,'' he said.

''That trust has to be re-earned, frankly.''

His comments come as the Financial System Inquiry chaired by former Commonwealth Bank chief David Murray suggested last week that bank capital levels in Australia might increase to further safeguard the system from systemic risk, including high levels of lending to residential property.

But Mr Smith replied on Tuesday that the Australian financial system ''is actually well capitalised, it is better capitalised than most countries''.

''We have actually adhered to the new regulations faster than most countries, and we are in pretty good shape. I actually believe you have to be a bit careful here for what you wish for,'' he said, noting that if capital levels were increased substantially then interest rates on loans would rise.

While a lot of the regulation imposed after the financial crisis was necessary, Mr Smith said, ''the problem was a lot of that regulation was reactive, and was instigated in many cases for political reasons to be seeing to be doing something.

''It was somewhat unco-ordinated, and the effects had not been thought through as normal policy would have been. The consequences of the unintended consequences were therefore hard to understand.''