European banks may face funding problems as competing regulations clash. As a result of higher capital requirements adopted by the Basel Committee on Banking Supervision, banks are selling more longer-term bonds to help prevent another crisis. The European Union’s Solvency II rules, which take effect in 2013, however, make investing in such bonds more expensive for insurers, which hold roughly 60% of banks’ subordinated debt. Higher costs may discourage insurers from buying the bonds.

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