The decision was made by the Act board and the announcement was made this afternoon at Parliament.
Announcing the decision a short time ago, Act president Chris Simmons said the board's decision had been unanimous.
Mr Banks told a press conference said he was focused on taking a repositioned Act Party into the next election.
"Every day is campaign day."
He said the party was returning to its heritage - the Association of Consumers and Taxpayers.
Former leader Don Brash resigned after the party's dismal performance at the election, attracting only 1.07 per cent of the vote.
In the previous election with Rodney Hide as leader, the party polled 3.65 per cent and had five MPs.
The party has been plagued by in-fighting for years.
Mr Hide was deposed in April last year in an unusually public coup by Dr Brash, a former National Party leader and former Reserve Bank Governor.
Dr Brash said at the time he wanted to get 15 per cent for the party.
Part of his plan was to replace Mr Hide with Mr Banks as the Act candidate for Epsom, which Mr Banks duly won.
Mr Banks is also a former Auckland mayor.
He is the Minister of Regulatory Reform, Small Business, and Associate Minister of Commerce, Education.
- Audrey Young, NZ Herald
