U.S. regulators updated the estimated cost of cleaning up hundreds of bank failures on Tuesday, saying the industry is seeing better earnings and a greater ability to raise capital.

The staff of the Federal Deposit Insurance Corp said it believes bank failures will cost the industry-backed insurance fund $60 billion between 2010 and 2014. Previously, the FDIC had estimated a cost of $60 billion between 2010 and 2013.

The FDIC staff warned, however, that spreading economic effects of the Gulf Coast oil spill and the European debt crisis could prompt the FDIC to raise its loss estimates.

The agency also approved a final rule to extend its Transaction Account Guarantee (TAG) program, a crisis-era guarantee that was designed to prevent business accounts from flooding to larger institutions from small banks.

The extension is for six months until the end of this year, with an option for an additional year extension.

Regarding the FDIC's insurance fund, the agency said it expects the fund to return to a positive balance in 2012. However, it said the agency has plenty of cash on hand to handle bank failures over the next five years.

The fund insures accounts up to $250,000.

The FDIC said it is sticking, for now, with its plan to maintain bank assessment rates at their current level through the end of this year.

After that, the plan calls for a uniform 3 basis point increase in assessments rates, effective Jan. 1, 2011.

Testifying before the Congressional Oversight Panel, which supervises the Troubled Asset Relief Program, Treasury Secretary Timothy Geithner said the program now was projected to raise federal deficits by $105 billion. That is $11.4 billion less than forecast in February in the government's 2011 budget proposal.

"Our economy is still going through an incredibly difficult period," Geithner said. "But the actions the government took have helped stabilize the financial system and restore growth."

TARP was approved by Congress in 2008 as a $700-billion bailout program, using taxpayers' funds, to backstop the faltering banking system by investing funds in them.

"The ultimate cost of the program will likely be a fraction of the $700 billion authorized by Congress," Geithner said. "Soon, we will return hundreds of billions of dollars in unused TARP authority to limit future debt, and to free up additional resources to meet the long-term needs of our country."

He said the Obama administration was "well on the way to winding down TARP" and any authority to make new loans through the program will expire in October.

Banks have repaid about 75 percent of the TARP money they received and taxpayers have earned about $24 billion through dividends, sales of warrants and stocks and fees from canceled guarantees.

Not all the investments will produce a profit.

"TARP investments in AIG (American International Group) will likely still result in some loss," Geithner said.

He said there also will be losses on investments in GMAC, the former financing arm for General Motors, though he said those losses will be less than anticipated last year.