"The National Government has no credibility while it continues to be propped up by an MP found guilty of knowingly filing a false electoral return", he said.
"This goes to the very heart of the public's faith in our electoral system."
But Mr Key told reporters this morning that Mr Banks' immediate political future was not something he could comment on.
"Ultimately that's a question you have to direct at Mr Banks. He's got a number of options available to him and I'm sure he'll be considering all of those. That will be everything from whether he intends to appeal the decision by the High Court yesterday or ultimately whether he intends to seek a discharge without conviction."
Read more:
• John Banks remains in Parliament - for now
Asked what his advice to Mr Banks would be, again he said it was "not for me to offer a view on that".
"I mean in the end he is the leader of another political party and I know people get sort of confused on all of this process but the reality is I can't offer him advice any more than I could offer David Cunliffe advice on whether he should resign."
Watch: John Banks: 'I don't do bad things'
Mr Banks relinquished his leadership of Act to Jamie Whyte earlier this year.
While Mr Key said it was "not for me to critique" Justice Edwin Wylie's decision finding Mr Banks guilty of electoral fraud, he said in all the dealings he had with him, "he's been an honest straightforward guy who's dedicated his life to try and make a difference to others".
Whether his Government would continue to use Mr Banks' vote to pass legislation over the next five weeks was "not actually a matter we've considered at this point".
The Government still had confidence and supply from parties other than Act, "so we'll give some consideration to that matter".
Read the verdict of Justice Wylie here:
Mr Cunliffe said Mr Key had "wilfully ignored the allegations against John Banks for almost two years while his Government relied on his vote to pass controversial legislation such as asset sales".
But responding to Mr Cunliffe's comment his Government had been "propped up by a corrupt politician", Mr Key said: "For a start there hasn't been any votes taken in that position because at this point he hasn't actually been sentenced".
"What I would say is I think we've been good transparent very straightforward Government, we follow the rules." Mr Banks so far hasn't returned the Herald's calls, but asked whether Mr Banks should resign, Dr Whyte told National Radio "I just want him to follow the due process".
Dr Whyte said he hadn't been in touch with Mr Banks since the verdict, "I haven't spoken to John I'm not quite sure what his intentions are on this and so I don't want to judge whether he's doing something honourable or not".
Watch: Banks and Dotcom at Court
He hadn't spoken with Mr Banks because "these events don't really concern the Act Party".
"John isn't involved in our campaign, he isn't going to be an MP after the next election and this as far as we're concerned because this was to do with his mayoral campaign this is not an Act Party issue."
