(Reuters) - Standard Chartered Plc said Monday it was in talks with New York's banking regulator to try to settle allegations it hid transactions with Iran.

The two sides have been negotiating ahead of a hearing set for Wednesday at which the bank must demonstrate why its state banking license should not be revoked over the transactions.

Last week, state Financial Services Superintendent Benjamin Lawsky said the bank hid Iran-linked transactions with a total value of $250 billion.

Standard Chartered Chief Executive Peter Sands has denied Lawsky's allegations and said the total amount that failed to adhere to U.S. sanctions on Iran was less than $14 million.

A bank spokeswoman said negotiations were continuing, but she declined to give details. "We're still trying to reach a settlement," the spokeswoman said.

New York's Department of Financial Services declined to comment.

The size of the settlement was fluid and subject to negotiation. Also, the talks could still collapse and Wednesday's hearing could be postponed to allow more time for negotiation.

A person familiar with the situation, who spoke on condition of anonymity because of not being authorized to speak about the matter, said Lawsky was seeking a settlement of about $350 million. Another person with knowledge of the situation said the figure had dropped to $250 million.

Nevertheless, both sides were under pressure to reach an agreement.

"When parties talk about dollars, that is usually an indication that they are converging," said John Coffee, a white-collar crime professor at Columbia Law School.

The stakes for Standard Chartered are high, given that the loss of its state banking license would effectively cut it off from direct access to the U.S. bank market.

Lawsky, too, needs a settlement, after taking criticism for acting alone in bringing regulatory action against Standard Chartered while probes by federal and other state agencies were ongoing.

In the past, New York bank regulators acted in concert with federal authorities and state prosecutors. Lloyds Banking Group paid $350 million to state and federal authorities in 2009 to settle charges it altered records for clients from Iran and other countries. Credit Suisse AG settled similar charges for $536 million the same year, Barclays Plc agreed to pay $298 million in 2010, and in June ING Bank agreed to pay $619 million.

Standard Chartered is already cooperating in a separate probe dating to 2010 that includes the U.S. Justice Department and the Manhattan district attorney. That investigation is aimed at determining whether Standard Chartered violated U.S. sanctions laws. Those talks have been taking place separately from the discussions with Lawsky's agency.

A settlement with federal officials could also result in a multimillion-dollar fine.

Officials for the Justice and Treasury departments and the Manhattan district attorney either weren't available for comment or declined to comment.

Standard Chartered's shares, which fell sharply last week after Lawsky's announcement, rose 0.5 percent to 1,333.5 pence on hopes of a resolution.

The Department of Financial Services has released no details of how Wednesday's hearing will be conducted and David Neustadt, a spokesman for Lawsky, declined to comment on whether the hearing would be open to the public.

The bank is awaiting information on whether executives will be required to attend, and Sands remained in Britain, a person close to the situation said who did not want to be named because of not being authorized to speak about the matter.

New York state does not formally require a hearing before revoking a bank's operating license, and regulators said that the session planned for Wednesday is a courtesy to allow Standard Chartered to present its arguments.

If settlement talks fail, Lawsky would undoubtedly have the case tried before a departmental administrative law judge to ensure that the bank cannot cite a lack of due process if it appeals a license revocation, Coffee said. An administrative judge's decision could then be appealed to higher-ups in the banking department.

The burden of proof for the banking regulator is relatively light because it only has to show that Standard Chartered was contributing to a lack of safety and soundness in the banking system -- a standard that can be satisfied with a lapse as simple as bad record-keeping.

For Standard Chartered, on the other hand, the burden of proof would be high if it tried to appeal any decision against it. Under Article 78 of New York's civil practice laws, a defendant has to prove that a regulator's findings were "arbitrary and capricious," a standard that regulatory cases involving zoning violations, rescission of medical benefits and license revocations rarely reach, lawyers said.