Danny Pearson was a shareholder in the big four bank in 2021 when the Andrews Labor government included it on a three-bank panel to deliver the state's banking and financial services.
He insists the contract was independently awarded by the Department of Treasury and Finance and he played no part in the decision-making process but conceded it was an "error of judgment".
"I recognise this could give rise to a potential of a perception of a conflict of interest and for that I unreservedly apologise," Mr Pearson told reporters at state parliament on Tuesday.
The Essendon MP has spoken with Premier Daniel Andrews and advised him he will place all of his shares in a blind trust.
The Commonwealth Bank shareholdings were disclosed by Mr Pearson to parliament and he said he had held them for more than a decade.
Mr Pearson said it did not occur to him that he held the shares when announcing Commonwealth Bank, National Australia Bank and Westpac as the winners of the five-year contract as part of a new panel.
In a statement at the time, the government said the panel arrangement would allow regional-based agencies to access a larger number of local bank branches and keep making payments at their local Australia Post offices.
Shadow treasurer Brad Rowswell said the decision directly benefited Mr Pearson.
"Any number of times he has stood in this very spot, holier than thou, pontificating about what is right and wrong and his opinion," he said.
"And today the bloke's been effectively caught with his hand in the cookie jar."
In July, federal government ministers were banned from holding shares in public or private companies under a new ministerial code of conduct unveiled by Prime Minister Anthony Albanese.
Mr Andrews stopped short of declaring he would ask all ministers to audit their shareholdings and take similar action to Mr Albanese.
"I don't own any shares myself. But I'm sure this will be a reminder to people that it's not just about acting appropriately, it's also making sure that can never be called into question," he said.
There may have been an assumption Mr Pearson and other ministers had already put their shares in a blind trust, the premier added.
"They clearly hadn't," he said.
The revelation comes after Damien Tudehope last week resigned as NSW finance minister after declaring he owned shares in toll road owner Transurban, the company that operates most of Sydney's toll roads.
Victorian Treasurer Tim Pallas in 2019 offloaded his Transurban shares, held in a Westpac BlueChip20 fund, after his government awarded the toll road giant billions to build Melbourne's West Gate Tunnel.
Mr Andrews denied Mr Pallas should follow the lead of the NSW minister.
"There was a perception issue at the time and the treasurer dealt with that," he said.
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