Where do banks go when they need to borrow money? how are banks charged when they borrow money?

When banks get in trouble and overextend and have to borrow money, they take it from the central bank of the nation where the bank is located. In the United States, that's the Federal Reserves for example. They can borrow from each other but they mostly go to the central bank. The banks don't like doing this because the interest rates are bad for them, but it helps them from becoming bankrupt and problematic for customers.

They are charged through interest rates because they have to give this money back to the central bank. They opt for this option even though it's more expensive because it's much simpler than making deals with other banks and it usually works well both for the country and the banks in the long run.

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