Bank interest rate spreads reflect the efficiency of banking industry, and it is of great practical significance to study the impact and mechanism of capital account liberalization on bank interest rate spreads. Constructing a multi-sectoral analysis framework that includes heterogeneous enterprises, this paper makes an analysis on the internal mechanism of capital account liberalization affecting bank interest rate spreads from the micro level and then makes an empirical test with the data of 41 emerging market economies from 1996 to 2016. The results show that capital account openness significantly reduces the interest rate spreads of commercial banks. Bank interest rate spreads decrease by 0.68 and 0.90 percentage points respectively for each unit of standard deviation increased in the de jure measure and de facto measure of capital account openness. Therefore, accelerating capital account liberalization is an important way to improve the efficiency of banking industry, reduce the cost of social financing and achieve high-quality economic development under the new normal. It is also recommended that commercial banks should vigorously expand non-interest businesses, promote product and business upgrades, and create new profit growth points to compensate for the adverse effects of narrowing interest rate spreads.