British banks may be sitting on big credit-crunch losses because their accounting methods differ from those of investment banks that have recently declared write-downs, it has emerged.

UBS, Deutsche Bank, Citigroup and Merrill Lynch have declared billions in losses on mortgage-backed securities and leveraged debt in recent weeks. But UK banks have remained largely silent, even though some are major players in these markets, according to a report.

Deutsche, UBS and the US banks account for the current value of assets through their profit and loss account, whereas UK commercial banks only have to take an impairment charge on their P&L if they think that they are going to lose money through non-payment. This is a longer-term calculation than the snapshot of ‘marking to market’.

Tony Clifford, a partner at Ernst & Young, told The Independent: ‘British banks have smaller investment banking operations and a smaller proportion of their assets will be at fair value, so the numbers should be somewhat smaller. Also, the markets have a chance of recovering by the end of the year.’