The U.S. Federal Deposit Insurance Corp. fund guaranteeing customer deposits in U.S. banks is rebuilding more quickly as bank failures continue to slow from their 2010 peak, the agency said in a report today.

The federal backstop, funded by assessments on banks, was at $11.8 billion at the end of 2011, up from a deficit of $20.9 billion at the end of 2009 as the credit crisis drove up the number of collapsing banks. The FDIC predicted it will spend $12 billion to cover bank shutdowns through 2016, according to a report updating the fund’s health. That five-year cost is $7 billion less than the FDIC’s last five-year projection in October.

The fund remains below its required reserve ratio of 1.15 percent of the deposits it insures and the agency expects it to reach that goal by the latter half of 2018. The FDIC says it anticipates this year’s assessments to stay at about the same $13.5 billion level as in the previous two years. The reserve ratio was at 0.17 percent at the end of 2011, the agency said. The Dodd-Frank Act of 2010 required the FDIC to increase the target ratio to 1.35 percent -- a level it must reach by Sept. 30, 2020.

After the liquidation of 157 failed banks helped send the fund into deficit in 2010, it returned to a positive balance last year. Last week, Fort Lee Federal Savings Bank of Fort Lee, New Jersey became the 17th FDIC-insured institution to fail this year, estimated to cost the fund $14 million. The number of banks on the FDIC’s confidential “problem list” has been declining, going from 844 to 813 in the final quarter of 2011, according to the agency’s quarterly banking profile.

The FDIC reports new five-year projections for the fund’s health twice a year. Today’s meeting of the board was the first for new members Thomas Hoenig and Jeremiah O. Norton, who were sworn in last week after recent Senate confirmations, which also established FDIC board member Thomas J. Curry as chief of the Office of the Comptroller of the Currency.

To contact the reporter on this story: Jesse Hamilton in Washington at jhamilton33@bloomberg.net.

To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net.