This paper investigates the impact of economic policy uncertainty on financial stability. Using data for 23 countries over the period of 1996 to 2016, we show that the impact is negative and statistically significant. Economically, a unit standard deviation increase in economic policy uncertainty decreases financial stability by between 2.66% and 7.26% of its sample mean. The negative impact of economic policy uncertainty on financial stability is stronger for countries with higher competition, lower regulatory capital, and smaller financial systems. We show that our finding is robust using bank-level data and different constructions of global panel portfolios, and controlling for Z-score skewness, the Global Financial Crisis, and for endogeneity. •This paper investigates the effect of economic policy uncertainty (EPU) on financial stability in 23 countries.•We find that EPU has a negative and statistically significant impact on financial stability.•The effect depends on the financial system characteristics.•The findings are consistent in a range of robustness tests.