* FTSE up 0.7 percent
* Banks rally as Basel ruling eases capital raising fears
* Miners, energy stock higher on bullish China data
By David Brett
LONDON, Sept 13 (Reuters) - Bank stocks helped push Britain's top shares higher on Monday after proposed new banking rules published Sunday came in less severe than expected, while data from China underpinned commodity gains.
By 0801 GMT, the FTSE 100 was up 36.70 points, or 0.7 percent, at 5,538.34, having hit a four-month closing high on Friday, up 0.1 percent at 5,501.64.
Banks were the sharpest risers on London's blue chip index after global regulators agreed to force banks to more than triple the amount of top-quality capital they must hold in reserve, but gave the lenders transition periods up to January 2019 or later, to comply with the rules.
Royal Bank of Scotland and Lloyds Banking Group rose 2.7 percent and 2.6 percent respectively.
"The banking rules coming out of Basel were probably not as bad as first feared with some of the uncertainty removed and the timeframe for the banks to get their houses in order quite generous," Richard Hunter, head of UK Equities at Hargreaves Lansdown Stockbrokers said.
Sticking with financials, Prudential Plc climbed 3.4 percent after the Sunday Times reported, without citing sources, that a group of Chinese investors are in the early stages of considering a takeover offer for British insurer.
Insurer Aviva, which has also been linked in the past with bid interest, added 1.2 percent.
CHINA DATA
The FTSE echoed gains overnight in Asia after data showed Chinese factories increased production in August and money growth easily topped analysts' expectations, showing that the economy remained buoyant despite government efforts to clamp down on bank lending and property speculation.
"It's a question now of convincing the markets that what we're seeing in China is simply very strong growth rather than overheating, and today's figures tend to suggest the former," Hargreaves's Hunter said.
The data sparked renewed demand for energy and mining stocks, which rose in tandem with commodities, as crude gained $1 a barrel and metals prices climbed across the board.
BP added 0.8 percent. The oil major believed compensation claims related to its Gulf of Mexico oil spill would be less than the $20 billion the oil giant put into an independent claims fund, analysts at Citigroup said, following a meeting with incoming Chief Executive Bob Dudley.
Miners Anglo American and Kazakhmys added 1.7 and 2.3 percent respectively.
On the downside, Primark owner Associated British Foods fell 3.3 percent as it said it saw a slight slowdown in sales growth at its fashion discount retailer, and that its second half profits would show a substantial rise resulting in a very strong rise in annual earnings.
Panmure Gordon cut its rating on Associated British Foods to "hold" from "buy", on valuation grounds.
It is a busy week for the retailers with Debenhams, Next and Kingfisher all due to report, with investors looking for guidance on the outlook for the sector, which many believe will be impacted by the UK government's austerity measures. (Editing by Sharon Lindores)