Bills Payable

DEFINITION of 'Bills Payable'

Similar to accounts payable, this term is used to describe a bank's indebtedness to other banks, principally a Federal Reserve Bank, that is backed by collateral consisting of the bank's promissory note and a pledge of government securities. In other words, bills payable is the money a bank borrows, mainly on a short-term basis, and owes to other banks.

BREAKING DOWN 'Bills Payable'

The main thing a bank needs to operate is liquidity, which means that banks need to have a lot of available cash. Banks borrow money from other banks in order to maintain ample liquidity levels.