The European commission is set to complain to treasury secretary Tim Geithner that proposed US regulations could discourage banks from trading European sovereign bonds, says the Wall Street Journal.

The paper reports that the USA's proposed 'Volcker rule', which is aimed at restricting banks from trading with their own capital, could potentially increase funding costs for European governments.

Internal market and services commissioner Michel Barnier said, "I will talk to Mr Geithner next month. We can't accept extraterritorial consequences or Europe will be tempted to do the same thing."