The head of the U.S. Federal Deposit Insurance Corp. said on Sunday that she wanted to end the too big to fail doctrine and shrink the shadow banking system that operates outside the reach of regulators.

FDIC Chairman Sheila Bair, speaking to the Institute of International Finance meeting here, said a proposal to create authority to shut down failing systemically important financial firms may need to be extended to insurers and hedge funds.

We need to end 'too big to fail' and this needs to be an overarching policy that applies to everyone, Bair said.

(Reporting by David Lawder; Editing by Ruth Pitchford)