Actions by New York State and New York City could soon put a crimp in the business activities of Swiss banks in the United States, according to banking analysts.

Though the initial impact is not likely to be dramatic, analysts said, the measures could deter U.S. corporations from doing business with Swiss banks because of legal uncertainties.

"As more and more of these kinds of announcements are made, it becomes an issue or a potential issue that corporate customers start to think about," said Lawrence Cohn, a banking analyst with Ryan, Beck & Co.

Last week city and state officials from New York announced plans to impose sanctions on Swiss banks starting Sept. 1, unless the banks agree to pay adequate compensation to Jewish organizations that have sued them over their wartime financial transactions.

The sanctions would be implemented in stages and would bar Swiss banks from bidding on overnight deposits and letters of credit, and from taking part in underwriting new state and city debt.

The banks face a series of lawsuits in New York accusing them of failing to release funds deposited by wartime victims of German persecution and of financially assisting the German war effort during World War II.

Jewish organizations and individuals who have sued for compensation rejected an offer of $600 million by Swiss banks as inadequate and are seeking a minimum of $1.5 billion.

UBS and Credit Suisse are the two banks most affected by the measures. Even if the sanctions' initial impact were limited, they would still cut into fees and commissions earned by both institutions, analysts said. They also noted that the lawsuits and sanctions are now eating up a large amount of Swiss bank management's time.

"One of the main effects has been the increasing diversion of management's time away from pursuing business objectives," said Raphael Soifer, a banking analyst with Brown Brothers Harriman.

If no settlement is reached by Nov. 15, both the state and the city will refrain from using Swiss-owned pension fund managers, such as SBC Warburg Dillon Read & Co.

By Jan. 1 the city and state would cancel existing investment management contracts and request city and state legislation barring Swiss companies from selling goods and services. Finally, the city and state would move on July 1 of next year to sell off their holdings in Swiss companies, including $136.7 million held as an investment by New York City in Swiss banks.

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