But basically, it is when the financial sector is doing its job of facilitating a smooth flow of funds in the economy to support economic growth. The opposite, financial instability, is probably easier to picture though. This is where the financial sector is experiencing disruptions so that it harms the economy.
The global financial crisis, or GFC, was a very vivid demonstration of what can happen when the financial system is unstable – credit supply dries up, investment and consumption fall and unemployment rises. So there is a very human cost to financial instability.