In a large mixing bowl, whisk together the 2 cups of cold milk and the 1 tsp of vanilla extract. Gradually add the 6.8 oz of instant vanilla pudding mix. Whisk until the mixture thickens, which should take about 2 minutes.
Add the 14 oz of sweetened condensed milk to the pudding mixture. Stir until well combined. Taste the mixture and adjust the sweetness if needed.
In a separate bowl, whip the 2 cups of heavy whipping cream until soft peaks form. If desired, add the 1 tbsp of powdered sugar to sweeten the cream slightly.
Gently fold the whipped cream into the pudding mixture using a spatula, being careful not to deflate the whipped cream.
In a 9x13 inch baking dish, start by laying down a layer of vanilla wafers. Next, add a layer of the pudding mixture, followed by a layer of sliced fresh bananas. Repeat layers until all ingredients are used, finishing with a layer of pudding on top.
Cover the dish with plastic wrap and refrigerate for at least 4 hours, or preferably overnight.