Capello stripped Terry of the honour following revelations of the Chelsea star's alleged affair with the mother of Wayne Bridge's young son.
The speculation surrounding Terry's relationship with Vanessa Perroncel proved to be so hurtful for Bridge that he now feels his position within the England squad is "untenable" and has no longer made himself available for international duty.
Capello is still hoping Bridge will change his mind.
However, the Italian has made it perfectly clear it will not be at Terry's expense, even if there is no way he can ever be restored to his former status.
"I asked for the captain to set an example for the young people; for the children and the fans. What he did was not good. I told him this and he understood.
"But I took the decision only because of what happened with Wayne Bridge, nothing else. I didn't ever consider taking John Terry out of the squad, just as I didn't decide to take Wayne Bridge out.
"And I don't believe the other players will have lost respect for him because they know his leadership qualities."