* Financial index has best day in nearly a decade
* 'Big Four' banks rise between 3.9 and 7.4 pct
* Commission 'stands back' from mandating shake-up - Moody's (Updates to close)
By Syed Saif Hussain Naqvi
Feb 5 (Reuters) - Bank stocks propelled Australian shares on Tuesday, with the "Big Four" having their best day in years as the market saw proposals of a high-powered inquiry as less severe than expected and not posing a serious threat to the country's most profitable sector.
The S&P/ASX 200 index .AXJO surged nearly 2 percent or 114.7 points to a near four-month high of 6,005.9. The benchmark rose 0.5 percent on Monday.
The government on Monday released the inquiry's final report, which made recommendations to curb financial sector systemic malpractice, but did not call for enforced divestments or cuts to executive pay, leaving the banks largely unscathed. Royal Commission into banking has stood back from mandating a wide shake-up of the country's highly consolidated banking structure, supporting bank profitability," Moody's Investors Service said.
In the first trading following the inquiry report, the financial index .AXFJ leaped 4.5 percent, its biggest jump since 2009, and accounted for nearly all of the gains on the benchmark.
The "Big Four" AMP.AX gained between 3.9 percent and 7.4 percent, adding a total of more than A$19 billion ($13.80 billion) in market capitalisation.
Wealth manager AMP Ltd, the worst hit stock because of the inquiry, rose 10 percent on Tuesday. In 2018, its shares tumbled 53 percent.
The inquiry had wiped more than A$60 billion from the collective market value of those stocks. of mortgage brokers dived after the inquiry recommended banning trailing commissions for mortgage brokers.
Mortgage Choice Ltd MOC.AX slumped 25 percent and Australian Finance Group Ltd AFG.AX dropped 29 percent.
Miners .AXMM advanced after Vale SA VALE3.SA was ordered by a Brazilian state court to stop using eight tailings dams after last month's deadly mine disaster, sparking supply concerns. heavyweight BHP Group Ltd BHP.AX rose 1.1 percent to its highest in seven and a half years, while Rio Tinto (LON:RIO) RIO.AX advanced 3 percent.
New Zealand's benchmark S&P/NZX 50 index .NZ50 rose about 1.1 percent or 94.3 points to 9073.72.
New Zealand listed shares of Westpac Banking Corp WBC.NZ and Australia and New Zealand Banking Group ANZ.NZ were among top percentage gainers, both up 7.8 percent.
($1 = 1.3772 Australian dollars)
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