US officials leading the effort to recover Holocaust-era assets yesterday urged city and state officials from around the country to refrain from imposing sanctions on Switzerland.

In a speech read to a conference of finance officials in New York, Stuart Eizenstat, Under-Secretary of State, suggested punitive measures against Swiss banks were "not only unwarranted but also would be counter-productive".

The conference is expected to approve the formation of a committee to monitor Swiss banks that may have moved some of the missing funds from Europe to their US branches in the 1930s and 1940s.

The banks most closely involved were the Swiss Bank Corporation and the Union Bank of Switzerland. At the weekend the SBC was censured by the New York Governor, George Pataki, for allegedly holding back information requested by the state. In October Californian officials said it was suspending all business with Swiss banks pending a satisfactory conclusion to the investigation into Holocaust assets.

Mr Eizenstat told yesterday's conference: "I see little wisdom in increasing pressure just when progress is finally being made and just when the desired results are finally within reach."