The decision and order related to an on-air discussion about the departure of former Oranga Tamariki chief executive Grainne Moss.
The BSA said the talkback caller made discriminatory comments which were then endorsed by the former Auckland mayor.
It said the authority found the comments were foreseeable in the broadcast environment MediaWorks had created.
"The breach, in this case, was not a simple slip-up where MediaWorks personnel failed to identify and respond to an isolated discriminatory comment before it could be broadcast.
"The way the talkback topic was framed by Mr Banks as part of his introduction created an environment in which such discriminatory comments were foreseeable and practically inevitable," the BSA said in the decision.
"The acknowledged lack of editorial boundary-setting and the systems within the production of the programme increased the severity of the breach to a level which was not sufficiently addressed by the broadcaster."
The BSA said it was conscious the public platform enjoyed by broadcasters "places them in a unique position to influence public views, effectively 'normalising' certain behaviours".
In these circumstances, the comments broadcast had the potential to cause significant harm within society, particularly among Māori communities, the decision said.