Adds background on NAB in paragraph 6, NAB response in paragraph 7, share moves in the last paragraph

March 6 (Reuters) - Australia's prudential regulator proposed a raft of reforms to tighten governance standards at banks and pension funds on Thursday, including capping directors' tenure, aiming to overhaul the financial sector recently marred by scandals.

The eight new proposals by the Australian Prudential Regulation Authority (APRA) come after a slew of financial scandals that have come to light since a Royal Commission revealed widespread financial wrongdoing in the sector in 2019.

Major lender ANZ Group ANZ.AX was embroiled in suspected misconduct in a 2023 government bond issue, which led to the resignation of its longtime CEO and a securities regulator's probe.

"While overall standards of governance have improved over recent years, we still see areas of weakness, including entities treating compliance with some requirements as a box-ticking exercise," said APRA chair John Lonsdale.

One of the major changes proposed includes setting a lifetime tenure limit of 10 years for non-executive directors. Another change will require significant financial institutions to keep APRA in the loop over their succession planning and potential appointments.

National Australia Bank NAB.AX Chairman Philip Chronican, who joined the top business lender's board in 2016 as a non-executive director, may have to resign from the board next year if the changes are implemented.

NAB declined to comment on a Reuters query, but as per its board composition policy, the chair's maximum tenure is 12 years.

Key board members at other major lenders - Commonwealth Bank of Australia $(CBA)$, Westpac, and ANZ Group - are still a few years away from completing a decade into their roles.

APRA plans to finalise and publish the updated prudential standards by early 2027, with implementation set for 2028.

CBA, Westpac, ANZ, and CBUS did not immediately respond to Reuters' request for comments.

Shares of three of the "Big Four" banks fell about 1%, while ANZ rose 0.3%, as of 0441 GMT.

(Reporting by Roshan Thomas and Sameer Manekar in Bengaluru; Editing by Alan Barona and Rashmi Aich)

((Roshan.Thomas@thomsonreuters.com))