While others appearing before Kenneth Hayne's royal commission offered apologies and conceded mistakes, the NAB chairman was a more reluctant witness.

In an often tense appearance at the inquiry, Ken Henry did not make any easy concessions of failures during several hours of questioning.

Senior counsel Rowena Orr QC grilled Dr Henry about the board's response to the "fees for no service" scandal, which embroiled a number of NAB subsidiaries.

Over the course of several years, NAB went back and forth with ASIC about compensation for customers, with the corporate regulator repeatedly rejecting the bank's proposals.

The former treasury secretary said he believes NAB should change its practice and just get on with the process of remediating customers, but added that there was a risk of ASIC taking action against the bank down the track.

"On occasions, it's almost like that game that children play — you're getting colder, you're getting warmer," he said of dealings with ASIC.

Internal documents from 2015 did not record any indication of whether NAB thought it had broken the law, despite the bank already having made a formal breach notification to ASIC of at least 12,000 customers being charged $2 million in fees for no service.

Dr Henry resisted Ms Orr's questions about the reasons behind the omission.

Orr: "Surely someone within your business at that point was thinking about whether this conduct contravened the law, and, if so, how it contravened the law?" Henry: "Yes." Orr: "Surely those were matters that the chief risk officer should have reported to the risk committee?" Henry: "Perhaps." Orr: "Back to where we started, 'perhaps', Dr Henry?" Henry: "Yes, perhaps." Orr: "And I'm afraid I still don't understand the reason for your hesitation?" Henry: "I probably can't explain it to you."

Executives paid full bonuses despite 'fees for no service'

NAB decided not to cut executives bonuses for the 2016 financial year despite the mounting "fees for no service" scandal, alongside a number of other problems.

While the board was initially unhappy with the chief risk officer and chief executive Andrew Thorburn's recommendations to keep the bonus pool untouched, it eventually conceded on the condition a "strong message" about risk management be sent to all staff.

Bonuses were cut this year but Ms Orr grilled Dr Henry about why action was not taken sooner.

"What better way to demonstrate intolerance of practices which are not in the customer's interest than to reduce the bonus pool as a result of risk?" Ms Orr asked.

"Well, we could have fired everybody, I suppose," Dr Henry replied.

NAB chairman Ken Henry leaving the banking royal commission on November 27, 2018. ( ABC News: Michael Barnett )

A letter sent by ASIC earlier this year showed the regulator's continued dissatisfaction at NAB's handling of customer remediation, saying "the latest proposal retreats even further from what we would expect NAB to consider to be in the interests of its customers".

Dr Henry said he was "appalled" by the letter, however it took Ms Orr several attempts to get him to concede the board should have stepped in earlier and told management "enough was enough".

Orr: "I would like you to answer my question. Do you accept that the board should have stepped in earlier?" Henry: "I wish we had." Orr: "I'm going to take that as a yes, Dr Henry?" Henry: "Well, you take that as a yes, alright."