Assistant Treasurer Stephen Jones says Australia needs to work with Pacific Island nations so they can "sustain a viable banking system with high levels of security".
This follows Treasurer Jim Chalmers' warning of challenges associated with the withdrawal of investment services in the Pacific and the announcement of extra funding for banking infrastructure there.
"If they don't have a banking system, they don't have a modern economy," Mr Jones told ABC's Afternoon Briefing program on Tuesday.
Mr Jones said banks also had an "obligation to serve community and to serve the region in which we operate," following Bendigo and Adelaide Bank's exit from Nauru.
"I think it's a social licence issue," he said.
"Banks are critical, they have an obligation in this area.
"It is true that over the last decade we've seen a rapid removal of correspondent banking services from the Pacific, faster than any other area in the world.
"It's got to be stopped."
– Lily McCaffrey