Under the terms of the settlement, the $1.25 billion is to be paid over three years. The first installment of $250 million is to be paid within 90 days.

The settlement will be divided among the claimants whose accounts are identified by a special audit, the 31,000 survivors and heirs who are part of class-action lawsuits against the banks, as well as other survivors who would benefit from the so-called "general distribution."

"This is the most significant action in terms of compensation since the German reparations agreement in the early 1950s, and it is important that it be distributed in the widest possible way," said Undersecretary of State Stuart Eizenstat, who had been mediating the talks for months.

"What leads me to believe that this will be done in an orderly, seemly and dignified way is because it will be done under judicial scrutiny."

Although U.S. District Court Judge Edward Korman will oversee the distribution of the settlement, there is a role for the Jewish organizations.

"Their views on distribution will undoubtedly have heavy weight," Eizenstat said, adding that Israeli survivors will be among those who will benefit.

Eizenstat called on Jewish organizations to reach a prior agreement with the survivors' lawyers.

"It is important that [the plaintiffs'] interests and those represented more broadly by the World Jewish Congress, the World Jewish Restitution Organization and the Jewish Agency be synthesized in a dignified and orderly way…so that we don't have an unseemly disagreement in court about the distribution," Eizenstat said.

There are concerns about turning over potentially vast sums to the WJRO because of delays in the distribution of the Swiss humanitarian fund. That fund, which was established in March 1997, has some $185 million, most of which is to be distributed by the WJRO among needy survivors.

The first allocations, of $400 per person, were not made until November 1997 — to some 80 survivors in Latvia.

The system for distributing $59 million to Israeli survivors is snagged in a dispute between the government and survivors' organizations. The procedure for allocating the American share was announced this week.

Paul Volcker, former Federal Reserve chief, is overseeing a forensic audit of dormant Swiss accounts, which is scheduled to be completed at the end of the year. The Volcker Committee, which was formed in May 1996 by an agreement between the WJRO and the Swiss Bankers Association, is said to have identified assets worth some $300 million at today's values.

It is up to Korman to certify who is eligible to benefit as part of the class, and to determine who qualifies for the general distribution.

"Will it be based on need? For all survivors? How do you define survivors?" Eizenstat asked. The definition will "almost certainly be broader" than that used for the German reparations programs, he said.