Westpac is worried the government's attempted crackdown on multinational tax avoidance will act as a "sledgehammer" when an "ice pick" would do.
Parliament is considering legislation designed to prevent international corporations paying artificially low tax bills.
Westpac's head of tax Jo Sawden told MPs on Wednesday the proposed law was poorly-targetted.
"For the most part, New Zealand taxpayers are very good - we want to pay our share of the tax - so there is only a small group that [Inland Revenue is] targetting.
"But what we've ended up with is legislation that could be a sledgehammer for something that you could use an ice pick for."
Inland Revenue (IRD) already knew which companies were complicit and should focus the rules on them specifically, she said.
"It could be as simple as saying that the rules apply where the lending entity is in a jurisdiction that has a low tax rate of say 15 percent or less."
Banks were "low-risk" for such behaviour as they were already heavily regulated by the Reserve Bank, she said.
"We don't think the global impact of these new rules have been totally thought-through."
BNZ also appeared before Parliament's Finance and Expenditure committee on Wednesday morning.
Head of taxation Campbell Rapley told MPs the bank's directors were most concerned about plans to expand IRD's information gathering powers.
Directors could be asked to hand over data about a client residing overseas, he said.
"If they ask us for that information and we give it to them, there could be ... privacy laws [in that country] that our directors are breaching."
Mr Rapley said that creates a "really difficult situation for the directors who have to choose which of the two criminal laws ... to break".
IRD should request the information directly from the international authorities, he said.
The legislation unanimously passed its first reading in Parliament in December.
The Finance and Expenditure committee is to report back on its findings in June before the bill's second reading.