The discussions reflect concerns that the various banks could make very different judgments about the impact of the market turmoil.
Banks have a high degree of discretion about how to value the losses but top executives believe too much variation will undermine market confidence.
Josef Ackermann, chief executive of Deutsche Bank, told the Financial Times last week it was “crucial” that banks’ positions were “marked to market” properly.
Some banks also fear that lack of consistency might prompt banking regulators to impose clearer but ill-judged rules.
“An overly prescriptive approach may not necessarily be the best thing,” said Cubillas Ding, an analyst at Celent, a financial services consultancy, adding that there was potential for a “knee-jerk reaction” from regulators.
In contrast to banking regulators, which banks say have indicated their desire to see some consistency, the US Securities and Exchange Commission appears relaxed about investment banks using different approaches to value complex securities.
The issues are particularly urgent for Wall Street banks such as Goldman Sachs, Morgan Stanley, Lehman Brothers and Bear Stearns, which next week start reporting their results for the three months to August.
Banks are facing potentially heavy losses on the more than $300bn they have committed to lend to finance private equity deals. In most cases, they had planned to sell on the loans but the price investors are prepared to pay has fallen sharply since the banks agreed the original terms.
One area of debate is how banks should assess potential losses on commitments for deals that might be renegotiated. For example, banks led by Citigroup and Credit Suisse are at present trying to persuade KKR to relax the terms on $24bn of funding for its takeover of First Data.
An executive at one large US bank said its talks with rivals suggested they were taking a similar approach on accounting treatment.
“Analysts, investors, journalists and regulators want to see things in a uniform context,” he said. However, an executive at another US investment bank said it feared some of its US and European rivals would be “playing games”.
The banks are also facing losses on their holdings of complex securities where there is often no clear market price because of low trading volumes. Mr Ding said banks had a high degree of discretion on valuations and the process was subject to “conflicts of interest and manipulation”.
The SEC, which stepped up checks of how five of the largest US investment banks are valuing mortgage-related securities, is comfortable with valuations being different between firms – as long as their valuations are consistently applied and checked. “We don’t substitute our opinion for our firms’,” said one senior SEC official.
John Dugan, Comptroller of the Currency, regulator for some of the top US banks, gave a warning last week that banks should use market prices, rather than “models”, to value securities even if trading volumes were far below normal.