The article focuses on the analysis of relations between a bank´s capital, i.e. own funds, and interest rate risk. Considerations are two folded: effects of investing directly capital funds on the bank´s risk profile, and effects of allocation types on interest rate risk magnitude.

The article proves that time structure of the capital invested determines the nature of reactions on interest rate changes observed in the balance sheet, which is a physical expression of the magnitude of accepted risk, becoming, therefore, a reference of its quantification. Relations between interest rate risk and capital allocation process are much more complex. On the one hand, capital allocation process is, in principal, resultant of risk estimated, and, on the other, the magnitude of risk is to some extent a derivative of the amount of capital allocated. This specific backward relation between capital allocation and risk magnitude results, among others, from interrelations between the following three factors important for each commercial bank: limited capital resources, cost of such resources, and risk related to ventures taken up by the bank.

In conclusion it might be assumed that dual nature of the bank´s capital role in managing interest rate risk facilitates to identify potential threats more precisely and thus enhances directly financial safety of a banking institution.