The 36 year old is set to be handed a role with the youth team, with manager Csaba Laszlo delighted with the outcome.
"Steve now has a new job," the Romanian coach told the club's official website.
"He has a new agreement with the sporting director and owner.
"The decision has been made to play Jamie (MacDonald) in goal and in the future Steve Banks will be the new goalkeeper coach. He will be on the training staff.
"We had to make a decisive decision and now the owner is here we have made a clear decision and I think a very good decision for everybody."