Madrid, financial centre?

July 2008 | By Ignacio de la Torre, Academic Director of Master in Finance, IE Business School

Over the last few years, Madrid has managed to climb a few positions to become a more important international centre of finance, but in order to consolidate itself in a top position it needs to carry out a series of improvements.

At the beginning of the 13th century, the all-powerful England of King John (the baddie in the Robin Hood films) was defeated by an extremely modest France, which at the time comprised only Paris and the surrounding area. What was the secret behind the French success? London was an important political centre with a financial power that was on the decline, whereas Paris was a political centre of little significance with a financial power that was just beginning.

This mediaeval anecdote should help us reflect on our capital city´s role as an international financial centre. Paradoxically, in a context of political decentralisation in which Madrid has seen how its political power has been considerably reduced, the city has developed huge economic power in terms of GDP and GDP per inhabitant. The next challenge is to take advantage of this economic importance, “capitalising” on Madridâ??s position as a top-tier financial centre. A few weeks ago, Deloitte published a report that classified Madrid as the fourth-ranking international financial centre (behind New York, London and Paris). However, a report commissioned by the city of London on the basis of 7,193 surveys (many of them biased towards Anglo-Saxon markets) position Madrid in 42nd place in terms of international financial importance. In recent years, Madrid has enjoyed an economic and financial environment that has allowed it to climb many positions as a financial capital, higher than number 42 without a doubt. Nevertheless, the black clouds that hang over our economy, the deficit of the Spanish current account, the difficulties affecting the securities markets and the low-level volume of corporate transactions will force us to increase efforts if we want Madrid to effectively be among the top five financial capitals.