The Federal Reserve may adjust banks' supplemental leverage ratios to improve Treasury market functioning as part of a broader review of capital rules, Governor Michelle Bowman said Friday.

The leverage ratio can discourage banks from intermediation in the Treasury market or holding ultra-safe assets, Bowman said. The SLR requires large banks to hold capital equal to 3% of their assets and 5% for systematically important banks.

Leverage ratios could become less binding as QT drains reserves from the system, she said in remarks prepared for the The Institute of International Finance in Washington. As the Fed recalibrates capital requirements to implement Basel III, Bowman said it should examine SLR, the countercyclical capital buffer and the stress capital buffer, "particularly where specific actions may have unintended consequences."