Economic policy uncertainty and the risk of Chinese commercial banks

• The findings indicate that an increase in economic policy uncertainty significantly exacerbates operational and credit risks of banks, while simultaneously reducing their risk-taking levels. • This effect is more pronounced in smaller and medium-sized banks. • Furthermore, the advancement of digital transformation in banks can effectively mitigate the impact of economic policy uncertainty. Based on panel data from 110 Chinese commercial banks over the period 2010–2021, this study empirically analyzes the impact of economic policy uncertainty on various dimensions of risk in Chinese commercial banks and its moderating effects. The findings indicate that an increase in economic policy uncertainty significantly exacerbates operational and credit risks of banks, while simultaneously reducing their risk-taking levels. This effect is more pronounced in smaller and medium-sized banks. Furthermore, the advancement of digital transformation in banks can effectively mitigate the impact of economic policy uncertainty.