Senator D'Amato applauds "an historic agreement" ( 357 K / 30 sec. AIFF or WAV sound)

NEW YORK (CNN) -- Swiss banks have agreed to pay $1.25 billion to settle lawsuits filed by Holocaust survivors and their heirs claiming the banks illegally kept millions of dollars deposited by their relatives before and during World War II.

"I hope this agreement will allow all of us to turn to the future and turn to the business of healing the wounds of the past, both here and in Switzerland," said New York Sen. Alphonse D'Amato announcing the settlement alongside representatives of the World Jewish Restitution Organization, the World Jewish Congress and Swiss banks. "This is an historic agreement ... it will bring closure to this sad episode."

The funds were deposited in private Swiss accounts for safekeeping. The banks have acknowledged that they made errors handling the funds but deny they deliberately kept them.

At the U.S. Federal Courthouse in Brooklyn, tens of thousands of plaintiffs reached the deal Wednesday to end the class action suits they filed against Credit Suisse and UBS almost two years ago. The first $250 million of the settlement is payable within 90 days, and the rest will be paid out over the next three years in annual payments of about $333 million.

Talks broke off in late June after plaintiffs angrily rejected a Swiss offer of around $600 million to settle the claims.

While researching these dormant accounts, investigators also discovered that the Swiss had agreed to buy millions of dollars of Nazi gold during the war. Much of that gold was stolen by the Nazis from the central banks of countries conquered by Germany or from individual concentration camp victims.