LONDON, Sept 7 (Reuters) - European shares fell on Tuesday,stubbing out a two-week rally, with banks hit by concerns overthe sector's health and the impact of capital reform, whileminers dropped on renewed jitters over Australia's tax plan.

The pan-European FTSEurofirst 300 index of top sharesprovisionally closed 0.4 percent lower at 1,061.73 points, withthe STOXX Europe 600 banking index down 1.2 percent.

The Wall Street Journal said recent stress tests in theEuropean banking sector understated some lenders' holdings ofpotentially risky government debt, while the German weekly DieZeit, quoting a draft proposal from the Basel Committee,reported that global banks will be required to hold Tier 1capital of 9 percent, including a 3 percent so-called"conservation buffer".

The Basel committee, in charge of drawing up global bankingrules, is meeting on Tuesday to discuss the planned reform.

"Nobody really knows yet how these reforms will affect thebanking sector and that is making the market quite nervous,"said Oliver Roth, head trader at Close Brothers Seydler Bank inFrankfurt.

Within the mining sector, Xstrata, BHP Billiton and RioTinto were off 1.2 to 1.4 percent, after Australian PrimeMinister Julia Gillard secured a second term in office, with hergovernment vowing to press ahead with a new mining tax. (Reporting by Harpreet Bhal)