ASIC has denied being too friendly with big banks and financial institutions and failing to investigate them for misconduct.

ASIC chair James Shipton has been slammed by the banking royal commission for letting widespread misconduct in the financial sector go largely unpunished.

Mr Shipton says he that accepts the corporate regulator needs to up the ante, but argues it needs more resources.

ASIC has 240 enforcement staff to deal with 12,000 complaints and 2,000 breach reports by financial services licensees each year.

“We have to make real-time decisions as to which matters we can investigate,” Mr Shipton told the royal commission on Thursday.

“I would not consider the very difficult real-time choices and very hard choices as a failure.”

Mr Shipton described his links with big banks leaders as professional working relationships.

“I personally exercise the highest degree I can possibly apply of professional judgment when I have these interactions, when I have these meetings,” he said.

“I have also spoken to these leaders, to a man and a woman, about the fact that I believe that they have forgotten that they are dealing with other people's money.”

ASIC’s regulatory remit is wider than comparable market conduct regulators overseas, but it is limited by staff numbers and budgets, the inquiry heard.

“We are constrained in probably every aspect of our regulatory work,” Mr Shipton said.

“It's certainly in investigations, certainly in matters relating to enforcement, but I would also make the case that we are constrained in our surveillance, our supervision, our important work on financial capability, and other work that we undertake.”

Mr Shipton agreed ASIC needs to take more enforcement action.

“We need to up our ante and be more agile in the deployment of that enforcement tool,” he said.

Live coverage of Mr Shipton’s questioning is accessible here.