Gelling also agreed the move by itself would not affect entities who were in effect acting for Iranian banks.

American officials decline to say whether the move against Bank Saderat would apply to other Iranian banks.

What is at issue, he said, is a request made last month by an Iranian bank to settle accounts in euros rather than dollars.

"This country can sanction the Iranian central bank and shut down the Iranian economy and we should do that right now."

The new sanctions impose penalties against entities - including corporations and foreign central banks - which engage in transactions with the Iranian central bank.

Rick Perry says sanctioning the Iranian central bank will do it.

As of 3pm all UK financial institutions were banned from doing business with Iranian banks.

In 2009 Iranian banks account for about 40 percent of total assets of the world's top 100 Islamic banks.

In 2008, Iranian banks extended 70 trillion rials ($7 billion) to quick-yield economic enterprises.

More than 20 major Iranian banks have been designated, including major state-owned banks).