In this paper, we study how the use of macroprudential policy instruments is associated with bank funding costs. To accomplish this, we develop several macroprudential indices based on policy objectives and include different macroeconomic and bank-level variables, while we also separately analyse the cost of debt and overall cost of funding. Our analysis relies on bank-level data in 43 European countries for the period between 2000 and 2017, and a macroprudential policy dataset based on an IMF survey. The results show the activation of macroprudential policies is chiefly related with lower bank funding costs, with this association being stronger for developed countries than emerging ones. The results also reveal positive links with certain macroprudential measures to bank cost of funding, offering further insight into the repercussions of calibrating and selecting macroprudential tools. •The use of macroprudential policy has intensified over the years•The activation of macroprudential instruments is significantly associated with lower costs of bank funding•The dampening effect of macroprudential tools on bank funding costs is stronger for developed countries than emerging ones.•The effects of macroprudential policy on the cost of funds depend on the country’s financial and institutional development.