By Chris Giles, Brooke Masters and George Parker

Sir Mervyn King has committed the Bank of England to cut down on exhaustive data collection in favour of a focus on risks to the banking system when it takes charge of financial regulation at the end of next year.

In his Mansion House speech to a City audience, the Bank governor called for powers for sweeping top-down regulation, rather than a return to a ?light touch? approach. He pledged to end an ?obsession with detail [that] was in fact a hindrance to seeing the big picture?.

Sir Mervyn followed the speech by George Osborne, chancellor, and echoed him on financial regulation, the threats from European directives and the economic outlook. Mr Osborne repeated his assertion that the recovery was always going to be difficult, as the troubles of the financial sector were depressing figures for growth but that the wider economy was much stronger.

The chancellor announced the sale of Northern Rock, in a sign that he sees some normality returning to the banking sector.

Sir Mervyn agreed on the current economic difficulties, insisting that if the Bank had acted to tame inflation with higher interest rates, the pain would be greater. To Mr Osborne?s delight, he rejected any notion of a ?Plan B? of slower spending cuts, saying ?to change the broad policy mix would make little sense?.

Both Sir Mervyn and Mr Osborne expounded on the new architecture for regulation. The governor stressed that the new Prudential Regulatory Authority, in charge of banking supervision inside the expanded Bank, would regulate using judgment and senior staff rather than detailed rules.

?I believe that we can operate prudential supervision at lower cost than hitherto by reducing the burden of routine data collection and focusing on the major risks to the system,? Sir Mervyn said.

Even if the PRA cuts back on requests for information, the industry may not feel much difference as the new European Banking Authority and the new Financial Conduct Authority, independent of the Bank, which will deal with competition and customer issues, will both demand information.

? The Financial Times Limited 2011