Federal banking regulatory agencies released a regulatory capital estimation tool Monday to help community banking organizations evaluate recently published Basel III-inspired capital proposals.

The new tool will serve as little solace to community banks, who feel the proposals, as written, are overly restrictive and should only apply to large-scale banks.

The tool helps organizations estimate the potential effects of the agencies' Basel III notice of proposed rulemaking on their capital ratios. The Basel III NPR attempts to strengthen the level of regulatory capital requirements and improves the quality of capital.

Thomas Hoenig, director of the Federal Deposit Insurance Corp., recently called for regulators to modify proposed Basel III capital standards because of their complexity. The Independent Community Bankers of America agrees, saying that the one-size-fits-all approach is not appropriate for community banks.

The ICBA is concerned with the proposed new risk weights on mortgages and certain types of commercial loans. It says community banks should have the option to continue using Basel I risk weights. 

"Community banks did not engage in the reckless behavior that contributed to the crisis and subsequent economic downturn,” ICBA Chief Executive Camden Fine said. “Imposing excessive regulatory standards on community banks would only threaten the nation’s economic recovery."

In June, the Federal Reserve Board, the FDIC, and the Office of the Comptroller of the Currency approved joint proposals for comment that would revise their current regulatory capital standards. The public comment period for these proposals ends on October 22.