In the following video, Fool analyst David Hanson interviews Motley Fool financial analyst Matt Kopenheffer regarding Bank of America (NYSE: BAC) as an example of a large bank facing the potential for a sudden rise in interest rates.
Matt describes an environment in which a jump in interest rates could cause the bank's cost of funds to rise faster than income from assets on the balance sheet. He also discusses three reasons large banks may be positioned to mitigate the potential decrease in earnings: core deposits, loan-to-deposit ratios, and shorter duration assets and hedging activities.