This paper investigates the impact of capital requirements regulations on problem loans in South Africa following the adoption of Basel II in 2008 and the implementation of Basel III between 2013 and 2019. Using dynamic panel techniques employing the difference and system generalised method of moments over the period 2000–2022, the study suggests that capital requirements regulations seem to increase problem loans in general. However, interacting the capital regulation index with the Lerner index, the results indicate a negative and significant effect. This suggests that capital requirements regulations are effective in reducing problem loans for banks with moderate market power. The results also show that both macroeconomic and bank-specific factors drive problem loans.