Abstract: Using an unbalanced panel data of 40 China's city commercial banks from 2008—2014 with ordinary least squares regression method. This paper studies the relationship between the marketization of deposit interest rate and banks' innovation ability, and analyzes the effect of deposit interest rate marketization on bank innovation ability from the perspectives of ownership structure and regional differences. The conclusion is that the marketization of deposit interest rate has a positive effect on the innovation ability of banks. That is to say, the marketization of deposit interest rate can form a "forcing mechanism" on the financial innovation behavior of banks. In addition, the financial innovation ability of state-owned commercial banks is higher than that of private commercial banks in the process of marketization of deposit interest rate. At the same time, innovation capacity of the city commercial banks holding foreign investors is higher than that of non-foreign ones.And in comparison with the eastern region, the incentive effect of deposit interest rate marketization on the innovation ability of city commercial banks is more significant than the central and western regions. Therefore, the city commercial banks should respond positively to the interest rate risk through an active financial innovation behavior after giving full consideration to their own reality.

Key words: marketization of deposit interest rate, innovation capability, ownership structure, regional difference, city commercial bank