In a large mixing bowl, whisk together the sweetened condensed milk and ice-cold water until smooth and well combined. Sprinkle in the instant vanilla pudding mix while whisking constantly to avoid lumps.

Cover the bowl with plastic wrap and chill in the refrigerator for at least 3–4 hours, or up to overnight, until very thick and custard-like. If it is still runny, chill for an additional 30 minutes.

Once the pudding base is fully chilled and set, add the cold heavy whipping cream to a separate large, chilled bowl. Beat on medium-high speed with a hand mixer or stand mixer until soft peaks form.

Add the vanilla extract and powdered sugar (if using) to the whipped cream and continue beating just until medium peaks form—light and billowy, not stiff.

Gently fold the whipped cream into the cold pudding base in 3 batches using a spatula. Use slow, sweeping motions from the bottom up to keep the mixture light and airy. The finished mixture should be mousse-like.

Right before assembling, peel and slice the bananas into 1/4-inch rounds so they do not brown. Have the vanilla wafers ready in an open box or bowl for easy layering.

In a large glass trifle bowl, 9x13-inch dish, or deep serving bowl, arrange a single layer of vanilla wafers to cover the bottom. Add a layer of banana slices over the wafers, then spoon a generous layer of the pudding mixture over the bananas, smoothing gently. Repeat the layers—wafers, bananas, pudding—until you reach the top, finishing with a layer of pudding.

Sprinkle crushed vanilla wafers over the final layer of pudding for texture and presentation. Cover the dish tightly with plastic wrap and chill for at least 4 hours, preferably 6–8 hours, to allow the wafers to soften slightly and the flavors to meld.

Just before serving, garnish with a few fresh banana slices and shaved chocolate or mini chocolate chips if desired. Serve cold, scooping down deep so each portion includes all the layers.