* Aussie shares see worst day in nearly eight weeks
* Financials account for most of the losses
* NZ trades flat as staples, healthcare diverge (Updates to close)
May 22 (Reuters) - Australian shares tumbled to a three-week low on Tuesday, led by bruised banks following admissions of misconduct by the country's biggest lenders in a powerful Royal Commission inquiry into the scandal-hit sector.
The S&P/ASX 200 index .AXJO fell 0.7 percent, or 42.6 points, to 6,041.90 at the close of trade. The benchmark slipped 2.90 points on Monday.
The country's "Big Four" banks have all admitted to misconduct in their submissions at a third round of public hearings that focuses on loans to small businesses. financial index .AXFJ fell 0.7 percent to its lowest since April 27.
Australia and New Zealand Banking Group Ltd ANZ.AX declined 1.6 percent and was the biggest drag on the benchmark, while Westpac Banking Corp WBC.AX slid 0.8 percent to a near four-week low.
Material stocks also accumulated losses, weakened by an extended fall in iron ore prices. IRONORE/
BHP BHP.AX , the country's biggest firm by market value, dipped 0.7 percent, while Rio Tinto (LON:RIO) Ltd RIO.AX dropped 0.5 percent.
Bucking the wider trend, James Hardie Industries PLC JHX.AX climbed 4 percent after reporting a 17 percent rise in annual adjusted net operating profit.
New Zealand's benchmark S&P/NZX 50 index .NZ50 fell 2.40 points to finish the session at 8,613.32.
Consumer staples accounted for nearly half of the losses, with heavyweight a2 Milk Company Ltd ATM.NZ dipping about 3 percent.
However, the fall was capped by gains in healthcare stocks, with Fisher & Paykel Healthcare Corporation Ltd FPH.NZ rising 1.3 percent to a six-week high.