8 Min Read
* Ukrainian banks pull out of Crimea after annexation
* Big Russian banks staying out for now
* Putin hopes for Russian patriotism over Crimea
By Alissa de Carbonnel and Elizabeth Piper
SIMFEROPOL, Crimea/MOSCOW, April 9 (Reuters) - In the rush to serve clients keen to open rouble accounts, staff at the first Russian bank to open its doors in Crimea have yet to find time to open the boxes stacked in the entrance or put up a proper sign.
Instead they are relying on a plastic banner with letters in red saying: "Russian National Commercial Bank: Your Russian bank in Crimea!"
Not that RNCB needs to advertise its services. With Ukrainian and Western banks closing, Crimea's 2 million people have been forced to deal with a cash economy since Russia annexed the Black Sea peninsula last month - an illustration of the economic obstacles that might lie ahead for a contested region.
Only three Russian banks have moved to fill the vacuum, the patriotism stirred by President Vladimir Putin by reclaiming "an inseparable part of Russia" falling flat in the face of Western sanctions that have deterred the country's big lenders.
In particular, many Russian lenders have been alarmed at moves by Visa and MasterCard to stop providing services, albeit in most cases temporarily, for transactions involving banks whose shareholders were on a U.S. blacklist.
RNCB was the first Russian bank into Crimea after the region's annexation, hurriedly setting up in some of the branches left empty by Ukrainian subsidiaries of Russian state-owned banks, Sberbank, VTB and Bank of Moscow, that have curtailed their work in the region.
It has been followed by two small Russia-focused regional banks whose limited business activities - they have few dealings outside Russia - means they have less to fear from sanctions than larger financial institutions with international exposure.
For Crimea's small businesses and residents, the lack of options has translated into long queues at hastily furnished branches like this one in the Crimean capital of Simferopol to open rouble accounts.
"One of the most pressing problems is the banking system," Alexander Batalin, chairman of electrical tools manufacturer Phiolent, who opened an account at RNCB last week.
Last month, his factory paid its 1,800 employees in cash after its accounts at Ukraine's Privatbank were frozen. The company has been unable to complete an order for new European equipment.
"The banking system is developing very slowly. There are only two banks (that are working) but there are such lines there, they aren't ready to service the new demand," he said.
Russian officials have lamented the lack of interest among banks to operate in Crimea, which voted to join Russia in a March 16 referendum the West called illegitimate.
With a majority of ethnic Russians, Putin hailed the return of Crimea as a victory, shrugging off sanctions targeting close officials and Bank Rossiya, a lender Washington says is the "personal bank" for his inner circle.
But the experience of Bank Rossiya, which has stopped all foreign currency operations to work only with the rouble after being put on a U.S. blacklist, has made other banks wary.
Russia's top two banks, Sberbank and VTB , are yet to start direct business in Crimea and say only some branches of their Ukrainian subsidies are working there at the moment.
Alexei Simanovsky, first deputy central bank governor, said not all banks were scared.
"There are those which cannot be frightened by sanctions - they work only in Russia," he said. "Maybe tomorrow (major banks) will not be there, but I believe that the situation will resolve itself ... in the foreseeable future, I am convinced there will be major banks there."
For now the smaller, regional banks may be keeping the offices warm for when the bigger banks decide they can return, once they have a clearer view on Western sanctions and any possible legal moves by Kiev to seize Russian assets.
They could also make a tidy profit.
"Nature abhors a vacuum. Ukrainian banks are leaving and Russian banks are coming. There is a lack of bank services on the peninsula, so despite what can hardly be called a healthy economy, banks could still get a healthy profit," said Maksim Osadchiy, head of the analytical department at CFB bank.
"With such a lack of bank services, they can bump up prices."
But even the smaller banks have some exposure to Western systems, showing that few institutions can operate in isolation in an increasingly global economy.
Osadchiy said RNCB issues both MasterCard and Visa, and has correspondent accounts in non-resident banks, but with a very small balance and turnover. Local media said the bank was sold recently by VTB subsidiary Bank of Moscow to two Crimean companies close to the new administration.
RNCB was unable to provide details of the reported deal.
A second bank, Genbank, opened its doors on Friday, local media said. With two branches - one in Siberia's city of Omsk and in Rostov-on-Don to the south - and a headquarters in Moscow, the bank issues Visa cards and has in its securities portfolio loan obligations of non-residents nominated in foreign currency.
Kraiinvestbank from Russia's southern Krasnodar region, just over the Kerch strait from Crimea, issues both MasterCard and Visa and has correspondent accounts in non-resident banks.
Genbank and Kraiinvestbank were not immediately available for comment.
The three are not yet able to fill the space left by Privatbank, which had the largest banking services network in Crimea with 339 branches. It closed them in mid-March.
"There was less than 3,000 hyrvnias on my card to draw my salary at Privatbank. For me, that's not a great loss, but nevertheless it's not very nice," said Kemal Adabashev, owner of a dentist surgery. "It is getting harder and harder to do business; prices are rising."
The head of the administration of the Crimean city of Sevastopol, Dmitry Belik, suggested banks had failed their clients in Crimea, criticising Raiffeisen Bank Aval for closing its Crimea branches by April 15.
Aval has offered its Crimean clients a choice - either close their accounts by April 15 and lose a percentage for the early termination of their contracts, or wait and then close them at branches in mainland Ukraine.
"Nobody is driving them away from Sevastopol. We are offering all banks in Sevastopol to renew their registration, get a licence from the Russian Central Bank and continue operating in Sevastopol," Belik said.
He criticised Ukrainian lenders for not selling their chains to their "Russian colleagues".
On this point, Ukraine's Privatbank would not be drawn.
"There will be information in the coming days," the company said when asked what were they going to do with their branches in Crimea.
For now, most people in Crimea will just have to wait.
"No one told me the bank was not working," said Katya Milko, 27, who works at an electronics firm and wanted to withdraw her salary from the local unit of Italy's Unicredit bank which is now up for sale.
"The other bank has such long lines, I can't imagine opening an account there now. I'll have to talk to my bosses." (Additional reporting by Natalia Zinets in Kiev, Oksana Kobzeva and Katya Golubkova in Moscow; Editing by Timothy Heritage and Janet McBride)