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* Kerry seeks to reassure 10 top bank execs
* Lenders seek action to match rhetoric
* Banks fear sanctions could be re-imposed (Recasts, adds lawyer quote, details)
By David Brunnstrom
LONDON, May 12 (Reuters) - U.S. Secretary of State JohnKerry told Europe's top banks they have nothing to fear fromresuming business with Iran, as long as they make proper checkson trade partners and pursue "legitimate business".
European banks, some of which have been punished forbreaking sanctions imposed on Iran, are sceptical it is now safefor them to restore trade ties with the country and have largelyheld back since the lifting of some restrictions in January.
"We want to make it clear that legitimate business, which isclear under the definition of the agreement, is available tobanks," Kerry said on Thursday during what is likely to be hislast trip to London before November's U.S. election.
About 10 executives from leading European banks took part inthe meeting, along with British Foreign Secretary PhilipHammond, secretary of state for business Sajid Javid and NormanLamont, trade envoy to Iran, a British official told Reuters.
British banks including Barclays, HSBC andStandard Chartered as well as some from other Europeancountries attended, sources familiar with the matter said.
The United States and Europe lifted sanctions in Januaryunder a deal with Iran to limit its nuclear programme, but otherU.S. sanctions remain, including a ban on Iran-linkedtransactions in dollars being processed through the U.S.financial system.
That has left Europe's banks nervous of resuming tradedespite encouraging words from the U.S., after lenders includingBNP Paribas and Standard Chartered paid outbillions of dollars in fines to resolve allegations of pastsanctions-busting.
Standard Chartered said after the meeting: "Will not acceptany new clients who reside in Iran, or which are an entity ownedor controlled by a person there, nor will we undertake any newtransactions involving Iran or any party in Iran".
BRIDGING THE GAP
Hammond said the strategic objective was to draw Iran backinto the international community, and this meant overcoming "thereality of what the European banks are finding in practice".
"We're trying to bridge that gap...to allow these Europeanand global banks to support European businesses in resumingnormal trade and investment patterns with Iran," Hammond said.
Banks' fears are exacerbated by the differing tone ofrhetoric between federal U.S. officials and State laws, many ofwhich still ban pension groups and funds from investing inoverseas companies that do business in Iran, Tom Stocker, aPinsent Masons lawyer with expertise in trade sanctions, said.
"It is all well and good for Kerry to give warm rhetoric butit needs to be backed with a clear general license issued by theU.S. authorities to conduct trade in Iran," Stocker said.
Ayatollah Ali Khamenei, the most powerful figure in Iran,has also blamed delays in the resumption of trade squarely onthe United States.
"The U.S. Treasury ... acts in such a way that bigcorporations, big institutions and big banks do not dare to comeand deal with Iran," Khamenei said in March.
European banks fear that legal business could beretroactively made illegal if sanctions were to be re-imposed. (Reporting by David Brunnstrom, Arno Schuetze, Lawrence Whiteand Kate Holton; Editing by Tom Heneghan and Alexander Smith)
