Banks made 194 appearances for Stoke and believes Butland must consider his future if he wants to remain involved with England.
"I'd love Jack to stay at Stoke for the long term, we all would, because he's a really super goalkeeper, but he might need to leave for the sake of his England career, which is a shame for Stoke fans though it's understandable," said Banks.
"I definitely think he's good enough for England, but the facts are, at the moment, you really need to play top-division football to be in with a shout of the England team. It's the way the world works.
"For now, though, Jack has just got to put that to one side, to the back of his mind, and focus on doing the best he can, giving it everything, for club and country, and everything will fall into place."