The article discusses interest rate swaps, a financial innovation of the beginning of the 80's, and their importance for managing banks' finance. After presenting the essence and construction of interest rate swaps, the article evaluates the role of this financial instrument in banks' activity depending on a bank's role (bank as an active partner, bank as an open or silent intermediate) in the swap market. A bank being an active partner takes a certain position in the swap market on its own risk, and uses the transactions to eliminate interest rate risks on both sides of the balance sheet. Being an intermediate, a bank acts as, generally speaking, an agent of other economic entities (including banks) wishing to achieve similar targets as banks in their active function.

Banks take certain types of risks related to swap transactions. The risks have specific structure, and they depend also on banks' role in the swap market. A substantial part of this article is devoted to the characteristic of such risks (credit, substitution, liquidity, transfer, matching partners, and economic and legal construction risks). Amongst the above named credit risk is a predominant category.

Empirical data cited at the end of the article show a dynamic swap market development. This development, illustrated by an exponential function, constitutes unquestionable evidence of interest rate swaps significance in managing the finance of banks, in particular, but also of companies.