* Index on third straight day of losses
* Banks under pressure
* 29 shares up, 168 down and 3 unchanged (Adds analysis, quotes, stocks on the move)
By Pauline Askin and Gyles Beckford
SYDNEY/WELLINGTON, Aug 7 (Reuters) - Australian shares fell 1.7 percent on Friday, led by financials as investors sold bank stocks on concerns of tough new capital rules.
Australia and New Zealand Bank Ltd Bank ANZ.AX fell as much as 8.5 percent after it said it was raising A$3 billion ($2.2 billion) in a share sale to meet tougher capital ratio rules. ID:nL3N10I021
The S&P/ASX 200 index .AXJO fell 97.3 points to 5,512.80 by 0418 GMT. The benchmark dipped 1.1 percent or 63.8 points to 5,610.1 on Thursday.
"ANZ is receiving pressure from three different areas - broker downgrades, profit update and the capital raising as well," Ben Le Brun, an analyst at Options Xpress said.
Other banks such as Commonwealth Bank of Australia CBA.AX and Westpac Banking Corp WBC.AX fell 2.6 and 1.9 percent respectively.
Mining shares also weighed heavily on the market, with Orica Australia ORI.AX sliding 16.22 percent and major minor BHP Billiton (LONDON:BLT) BHP.AX falling 2.3 percent.
All sectors were in the red, with construction company CIMIC Group Ltd CIM.AX falling 2.4 percent to a one-week low after Morningstar downgraded its rating on the stock. ID:nL3N10I1L7
Westfarmers WES.AX , which runs Coles supermarkets, and Woolworths WOW.AX both fell over 1 percent.
Asian shares were down, tracking a sell off on Wall Street ahead of non-farm payroll data due later in the day. ID:nL3N10I01L
For more individual stocks activity click on STXBZ
NZX50 share index .NZ50 was 0.5 percent lower at 5,901.22 as the market consolidated ahead of the company reporting season starting next week.
The market was led lower by falls in Contact Energy CEN.NZ , Fletcher Building FBU.NZ and casino operator Sky City SKC.NZ , which is the first of the majors to report next week.
Genesis Energy GNE.NZ , which said on Thursday it was closing its last coal-fired generation in 2018, fell 2.9 percent as investors digested the impact the move might have the company's future costs.
Fruit exporter and marketer T&G Global TGG.NZ fell 2.5 percent despite reporting an 18 percent lift in its full-year profit. ID:nWNBS015NF
Dairy giant Fonterra's shareholder fund FSF.NZ surged as much as 4 percent as it slashed its forecast payout to suppliers by nearly 27 percent to NZ$3.85 a kilo milk solids because of a slump in prices and global oversupply, with a further dividend from commercial activities. ID:nL3N10H1XA
But it surprised by saying it would make interest free loans to its farmers to support their incomes until prices improve. (Editing by Anand Basu)