Russia’s central bank on Monday barred four Ukrainian banks from operating in Crimea, saying they had failed to meet their obligations to creditors and depositors.

All operations other than transfers of assets or liabilities of the Crimea-based units of Privatbank, Vseukrainsky Aktsionerny Bank, Bank Kyivska Rus and Imexbank had been stopped, the Bank of Russia said in a statement.

The step underscores the difficulties in the region’s economic transition after Russia annexed it last month.

President Vladimir Putin has seen his popularity ratings soar to a record of over 80 per cent as the annexation has fuelled Russian patriotic feelings, and Moscow has promised to boost the peninsula’s economy with new infrastructure investment and by raising pensions and civil servants’ pay to Russian levels by July. Separately, the government has submitted to the Duma draft legislation that would allow the establishment of a gambling zone in Crimea.

But Moscow is beginning to face complaints and concerns over the economic cost of the move into Crimea. At Mr Putin’s annual televised call-in show last week, residents of newly-annexed Sevastopol asked the president how Moscow would help them as some banks had stopped allowing withdrawals.

Mr Putin said Moscow had tried to address those problems with the respective Ukrainian banks and financial regulatory authorities but Kiev had been unresponsive.

The Russian government wants to complete Crimea’s economic transition, including the switch from the Ukrainian currency hryvnia to roubles, by the end of the year. But alongside securing power and water supplies, the banking system is proving one of the most difficult areas.

According to Ukraine’s central bank, more than 20 Ukrainian banks operated over 1,000 branches in Crimea before the annexation. But over the past month, many, including the Ukrainian subsidiaries of Russian financial institutions such as Alfa-Bank, have suspended operations or pulled out altogether.

Bank Rossiya, the bank sanctioned by the US in March over Moscow’s Crimea annexation, has said it will move into Crimea.

The Russian central bank’s decision follows moves by a growing number of foreign companies operating in Ukraine to suspend operations in Crimea citing logistical hurdles and unclear legal framework, including banking groups Raiffeisen, BNP Paribas, OTP as well as fast-food giant McDonald's.

Weeks ago, Russian officials said some of their country’s leading banks, including Sberbank and VTB, were also shying away from direct business activity in Crimea fearing penalties from the West which has slapped Moscow with sanctions for annexing the peninsula.

Privatbank is one Ukraine’s biggest banks and belongs to the business empire of oligarch Ihor Kolomoisky, whom the new government in Kiev appointed governor of the eastern region of Dnipropetrovsk.

VAB is controlled by Oleg Bakhmatyuk, a Ukrainian oligarch who controls Ukraine’s largest farming and egg business.

The largest shareholder of Bank Kyivska Rus is Ukrainian banker and economist Victor Bratko.

Imexbank is owned by Ukrainian lawmaker Leonid Klimov.

Additional reporting by Roman Olearchyk

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