Washington, Jun 17 (DPA): Oil giant BP has agreed to set up a $20-billion fund to compensate local Gulf Coast businesses and fishermen devastated by the ongoing oil spill, US President Barack Obama said after a meeting with BP's top executives Wednesday.

BP Chairman Carl-Henric Svanberg also announced that the British firm was suspending all dividend payments to shareholders this year as it works to clean up the worst oil disaster in US history.

Obama met with Svanberg, chief executive Tony Hayward and other top executives for the first time since the April 20 explosion of a BP-leased rig sparked the ongoing oil spill in the Gulf of Mexico.

The meeting and claims fund marked "a good start and it should provide some assurance to the small business owners ... that BP is going to meet its responsibilities," Obama said in remarks from the White House after the meeting.

For his part, Svanberg said "we apologize to the American people on behalf of all the employees in BP, many of whom are living in the Gulf Coast."

Central to the meeting, BP agreed to pay $20 billion over four years into an independently-administered fund to handle claims for damages from local Gulf Coast businesses fighting for survival.

Despite the anger and frustrations against BP, Obama said it was critical that the company remain afloat. BP would be able to pay into the fund over multiple years in order to avoid a major hit to its finances that might scare investors and drive the British firm out of business.

"BP is a strong and viable company and it is in all of our interests that it remains so," Obama said.

The escrow account would be managed by Kenneth Feinberg, who has also handled a restitution fund for victims of the September 11, 2001 attacks. More recently he was the White House "pay czar", tasked with looking at salaries of financial firms that took emergency government bail-outs during the credit crisis.

The BP heads spent more than four hours at the White House Wednesday morning meeting with administration officials. It was not clear how much of that time Obama spent in the meeting.

The discussions came one day after Obama delivered a prime-time speech from the White House Oval Office vowing to do everything in his power to help stop the oil spill and ensure that BP lives up to its responsibilities over the long term.

Obama has steadily ratcheted up pressure on BP amid anger from local Gulf Coast residents over its failure to end the worst oil spill in US history. BP hopes to capture about 90 percent of the oil gushing from an underwater well by the end of the month.

The president had been initially reluctant to meet with BP, but switched tracks as the administration drew criticism for a hands-off approach to the crisis.