* Banks lower on Mervyn King's comments on regulation
* Energy firms, miners down
* Food retailers up; Nomura hikes Tesco target
* London Stock Exchange falls on Goldman downgrade
By Paul Sandle
LONDON, Oct 21 (Reuters) - Britain's top share index was 1 percent lower in midday trade on Wednesday, as miners and energy stocks fell on weakness in commodity prices while banks fell after the BoE Governor said regulation would be tightened.
At 1208 GMT the FTSE 100 was down 57.92 points at 5,185.48, after closing 0.7 percent lower in the previous session having hit a fresh high for the year at 5,298.54.
Banks weighed on the index after King said late on Tuesday a fundamental rethink of how the banking sector is structured was needed to prevent a recurrence of the financial crisis.
RBS, 2.8 percent weaker, led the sector lower, with Standard Chartered down 1.9 percent and Barclays and HSBC 1.1 and 0.9 percent lower respectively.
"They are being given permission to rebuild their capital base but don't be under any illusion that once that is deemed to have been restored the regulatory backdrop is going to change," said Philip Lawlor, Chief Portfolio Strategist at Nomura.
Lloyds fell 1.9 percent. Sources said Britain's regulators are moving closer to approving a plan by the bank to escape a costly government-backed scheme for bad debts.
Energy issues reversed early gains as crude prices slipped to just over $78 a barrel. BG Group, BP and Royal Dutch Shell fell 2.6 to 0.7 percent.
Miners were also weaker, dented by softer metal prices. Rio Tinto, Xstrata, Lonmin, Anglo American, Kazakhmys and Fresnillo were 2.4 to 3 percent lower.
Food retailers were higher, led by a 1.8 percent gain in Tesco after Nomura upped the stock's target price to 526 pence from 405p with a "buy" rating.
Plumbing supplies group Wolseley was the top riser, up 3.5 percent after BofA Merrill Lynch upgraded its stance on the stock to "buy" from "underperform".
The broker also upped its recommendation on blue chip real estate firms Hammerson, to "buy" from "neutral", and Land Securities, to "neutral" from "underperform". The shares rose 1 percent and 0.5 percent respectively.
The FTSE 100 has so far rebounded 50 percent since hitting a floor in March and crossed the 5,200 level for the first time in over a year last week on growing optimism about the outlook for corporate earnings.
MORGAN STANLEY EYED
With the quarterly earnings season under way in the United States, investors will keep a close eye on results from Morgan Stanley for signs of recovery in the banking sector.
London Stock Exchange shed 2.5 percent after Goldman Sachs cut its rating to "neutral" on valuation grounds and removed the stock from its Pan-European "Conviction buy" list.
Prudential fell 2.2 percent. The Financial Times reported that the life insurer is thought to be conducting a preliminary assessment of the likely benefits of a separate listing in Shanghai or Hong Kong.
Within the sector, Aviva, Old Mutual and Standard Life shed 1.2 to 1.1 percent.
Home Retail fell 1.3 percent as the retailer met forecasts with flat first-half profits and said it was planning cautiously for the future.
BAE Systems, BSkyB, Smiths Group and Whitbread traded ex-dividend, taking a total of 1.85 points off the index.
On the economic front, the CBI's Industrial Trends for October showed factory orders weakened at a faster pace than expected, but manufacturer's outlook for the immediate future was its brightest since March 2008.
The Bank of England's Monetary Policy Committee (MPC) voted unanimously to leave the size of its asset purchase programme unchanged at 175 billion pounds and interest rates steady at 0.5 percent earlier this month, according to minutes released on Wednesday. (Editing by David Holmes)