If there is no settlement between the banks and representatives of the claimants by September 1, New York authorities will bar short-term investments with Swiss banks and stop the banks and investment firms from selling state and city debt, New York city comptroller Alan Hevesi said.

They also will not allow banks to provide letters of credit, which are insurance policies on city debt. The announcement comes a day after a commission, led by Hevesi and representing hundreds of US finance officials, cleared the way for such sanctions.

If the impasse continues, Hevesi said he and state comptroller H Carl McCall would extend the actions to additional Swiss financial services on November 15 and to all Swiss companies on January 1.

California treasurer Matt Fong, who oversees $32 billion in funds, said that beginning Thursday his state will not seek new contracts withUS subsidiaries of Swiss banks.

Hevesi blamed the Swiss government for a breakdown in the negotiations, which prompted the sanctions.

``The line in the sand apparently has become a line in concrete,'' he said, adding that the decision to endorse sanctions came when a representative of the Swiss government told the commission that Switzerland will ``never ever'' participate in negotiating a settlement.

New York has combined assets of almost $200 billion in state and city pension funds, the second and third largest in the country, respectively invested in Swiss banks.

Hevesi said he hopes US officials will allow a measured process of sanctions to give negotiators time to resolve the issues. That didn't mollify Swiss banking officials.

Tens of thousands of Holocaust victims deposited money in Swiss banks as the Nazis gained power in Europe.

But victims' relatives say bank officials stonewalled survivors and their heirs after World War II, claiming they could not find accounts or demandingnon-existent death certificates before giving funds to relatives of those who died in concentration camps.

Three Swiss banks made a take-it-or-leave-it offer of $600 million last month. Jewish leaders rejected the offer, calling it insultingly low. Melvyn Weiss, lawyer for more than 31,000 plaintiffs in a lawsuit against Swiss banks, said Jewish groups have proposed a $1.5-billion settlement that would cover claims against all Swiss banks as well as the Swiss government.