In the flood of proposals to reform bank regulation, creating a consumer protection agency and creating a system to deal with troubled, "too big to fail" financial institutions are the most important, Federal Deposit Insurance Corp. Chairman Sheila Bair said in New York Tuesday evening.

The consumer protection agency the administration of President Barack Obama proposed "needs to get done," and the authority to dissolve large failing banks "is at the top of our list," she said. However, differences of opinion about which regulator should get such authority and how the regulatory system should be reformed make a swift reform unlikely.

"I really don't think anything is going to happen this year," Bair said during a discussion sponsored by the American Banker newspaper and US Banker magazine, two trade publications.

Bair reiterated her concern that one super-regulator for banks would fail to address the lack of oversight over the so-called shadow banking industry, which includes non-bank lenders like CIT Group (CIT) and participants in the securitized and syndicated loan markets.

Regulation needs to become more effective rather than more bureaucratic, Bair said, echoing a statement by JPMorgan Chase & Co. (JPM) chairman and chief executive James Dimon a few weeks ago during a discussion both attended at the annual meeting of Clinton Global Initiative in New York.

Bair said she expects bank failures to continue at an accelerating pace. "It's just a bad economy," she said.

Though she would not say whether she expected more or fewer banks to collapse next year than this year, Bair said she does not expect the total number of bank failures to become as high as during the savings and loan crisis, when over several years more than 1,000 institutions failed.

Asked about the fateful week last fall when Wachovia Corp. came close to collapse and was subsequently sold, Bair said that she had no choice but to allow Wells Fargo & Co. (WFC) to break up the agreement in principle Wachovia had struck with Citigroup Inc. (C).

The offer by Wells for Wachovia "was better for shareholders and required no assistance" from the FDIC to ring-fence losses from Wachovia's loan book. "Even if we wanted to, we had no authority" to stop Wells and allow Citi to go through with its plans to buy Wachovia.

-By Matthias Rieker, Dow Jones Newswires; 212-416-2471; matthias.rieker@dowjones.com