We investigate the influence of the institutional environment on bank capital levels. Using a sample of 183 banks operating in the MENA region for the period 2004 to 2014, we find that, when stock markets have little presence, institutional variables significantly affect risk-weighted regulatory capital ratios but not leverage ratios. This is also more pronounced for conventional, listed, non-government owned bank. Conversely, when stock markets are more developed, only leverage ratios are influenced by institutional factors. Our findings contribute to the bank capital structure literature and have important policy implications for developing countries.