Gordon Brown is looking at a number of options to help the banks
The prime minister has demanded that banks admit how many "toxic assets" they have on their balance sheets.
Gordon Brown told the Financial Times the banks had to "come clean" about these bad debts so people could trust them again.
High Street bank executives are holding talks with Treasury officials over the weekend about the economic crisis and the possibility of more help.
The talks come after shares in some major banks fell sharply on Friday.
Barclays was worst hit, down 25%, forcing it to calm market nerves by saying it knew of no reason why its value should fall. RBS closed 13% lower.
In the FT interview, Mr Brown refused to rule out further bank nationalisation plans or injecting taxpayers' money into the sector.
The government is expected to unveil new measures next week to stimulate lending to major businesses.
Mr Brown said: "One of the necessary elements for the next stage is for people to have a clear understanding that bad assets have been written off.
"We have got to be clear that where we have got clearly bad assets, I expect them to be dealt with."
Mr Brown said unless this issue was resolved there was a risk of banks retreating into "financial isolationism" where big banks retrench from the global market into their domestic markets.
He said Royal Bank of Scotland (RBS), which is 60% part-nationalised, had begun retreating from investing overseas - but international co-operation was essential if the global credit market was to be revived.
On Friday Mr Brown and Chancellor Alastair Darling took part in discussions with the Governor of the Bank of England, Mervyn King, and Financial Services Authority chairman Lord Turner of Ecchinswell.
The meeting came amid reports the government was considering plans to use billions of pounds of taxpayers' money to create a "bad bank" which would buy up the "toxic assets" from the banks - leaving them free to lend again.
However, the BBC's business editor Robert Peston said he was surprised the government had not "knocked on the head" the notion that it was creating a "toxic bank".
He said he expected it to announce on Monday, or later in the week, "the mother of all bank insurance schemes".
"Our biggest banks would identify their bad loans and foolish investments and then pay a fee to a new state-backed insurer to protect themselves from losses over a certain level on these bad assets," he said.
Among the other proposals being considered are plans to ring-fence those assets on banks' balance sheets.
The government has already attempted to shore up the banks with a £37bn recapitalisation scheme, but this failed to kick-start lending.
A Treasury spokesman said a package would be unveiled in coming weeks.
Vicky Redwood at Capital Economics said the near future was looking bleak for the banks.
"We're going to face a staggering amount of bank losses over the next two or three years as the full impact of the recession is felt, and we see household defaults on their debt rises, unemployment rises and corporate debt defaults rise too.
"And so, in total, banks could be facing around £85bn worth of bad debts."