Thursday, July 2, 1998 Published at 23:53 GMT 00:53 UK
New York's sanctions on Swiss banks
Talks between Swiss banks and US officials broke down
New York City and state officials said on Thursday they will begin imposing sanctions on Swiss banks in 60 days unless the banks reach a settlement on the issue of unreturned assets of holocaust victims.
The announcement from senior New York officials came after a commission cleared the way for states across America to declare such sanctions.
New York's sanctions are intended to apply gradually, increasing pressure on the Swiss banks to try to force them to negotiate with the descendants of holocaust victims.
Unless negotiations begin in the next couple of months, the first sanctions will come into effect on 1 September, barring short-term investments with Swiss banks.
On 15 November, the actions would be extended to other Swiss financial services, and on 1 January,1999, to all Swiss companies.
The sanctions are potentially damaging as New York has almost $200bn in state and city pension funds invested in Swiss banks.
California has already said it will not seek new contracts with subsidiaries of Swiss banks.
The State Treasurer in California, which has about $2bn on deposit in Swiss banks, said his state would announce some form of action on Thursday, but did not give details.
The US Federal Government is opposed to such sanctions.
The banks issued a statement calling the sanctions unwarranted, counter-productive, unconstitutional and illegal. They said the banks would not be pressured into paying exorbitant and unwarranted sums of money that they claimed bore no relation to the facts.
The Swiss banks have so far failed to reach agreement with groups representing the relatives of holocaust victims over the question of compensation.
Jewish organisations are seeking $1.5bn to cover all claims by relatives and descendants of holocaust victims, who say the banks retained family assets.
The banks however have offered only $600m.
American finance officials have been threatening to impose sanctions on Swiss banks for several months, but they postponed taking action until the banks had considered the $1.5bn settlement proposed by the Jewish groups.
The decision by the committee of finance officials to go ahead with the action came after the World Jewish Congress dropped its objection to sanctions.