WASHINGTON (Reuters) -- The United States urged the European Union this week to join it in banning business with Iran's Bank Sepah, which it accuses of funding efforts to secure the atom bomb, a U.S. official said.

U.S. Deputy Treasury Secretary Robert Kimmitt argued such a move was required by a UN resolution on December 23 threatening Iran with sanctions if it did not halt its nuclear activities.

Iran says its nuclear program is peaceful.

"He said they should take that action because of the UN Security Council resolution which they signed on to," the U.S. official said of Kimmitt's meetings with EU foreign policy chief Javier Solana and others during a trip to Brussels on Monday.

Kimmitt told Reuters at the Davos World Economic Forum on Thursday he was encouraged by EU assurances that the bloc would fully implement the UN resolution, but did not refer specifically to Bank Sepah.

"We both want to abide by the rules ... The most important thing is to lay the political foundations, and I was pleased with my meetings with the EU in that respect," he said.

State-owned Bank Sepah denies U.S. charges it was helping Iran acquire nuclear weapons and condemned the ban on U.S. companies or citizens doing business with it.

EU foreign ministers vowed on Monday to implement "in full and without delay" the sanctions banning transfers of sensitive nuclear material to Iran and freeze assets of those associated with the nuclear program.

An EU official said discussions in the 27-member bloc continued on how it would apply the measures if Iran had not halted uranium enrichment by the end of a 60-day deadline.

Bankers say UN sanctions themselves may only directly target the country's nuclear program but they are having a wider impact on confidence, making investors and international financial institutions more cautious for fear of an escalation.

Unilateral U.S. sanctions on two big Iranian state banks including Bank Sepah are impeding business, they say.

"They (Americans) are systematically trying to destroy the Iranian reputation. It is a kind of economic war," said one international banker in Tehran, who asked not to be identified.

Since last year, bankers say most international banks have stopped dollar transactions with Iran because of U.S. pressure.