The claim comes in a leaked letter from the Higher Education Funding Council for Wales (HEFCW).
It follows a damning report from the higher education watchdog the Quality Assurance Agency.
The university confirmed its chairman had the letter but said it would make no further comment.
The University of Wales awards degrees and has ultimate control over standards and quality at five Welsh institutions.
However, nobody at the University of Wales Institute, Cardiff (Uwic), Trinity Saint David, Glyndwr, Newport or Swansea Metropolitan University was available for comment.
In June, Education Minister Leighton Andrews said the university had "let the country down" after a watchdog report found "significant shortcomings" in its overseas operations.
Continue reading the main storyThese reports contain some extraordinary findings, some of them expressed in terms that I have never previously seen used by the QAA”End Quote Prof Philip Gummett HEFCW chief executive The university is the second-largest degree awarding body in the UK and has approved more than 130 colleges worldwide to offer courses leading to its certificates, which are the same as those awarded in Wales.
The QAA investigated three partnerships giving cause for concern in the far east, two of which came to light in a BBC Wales Week in Week Out programme.
'Oversight'The leaked letter from Prof Philip Gummett, chief executive of the HEFCW - the organisation which funds universities - to the chair of the university's council said:
"Having read many QAA reports over the years, I consider that these reports contain some extraordinary findings, some of them expressed in terms that I have never previously seen used by the QAA".
Prof Gummett said he was writing in the context of HEFCW's responsibility for assuring the quality of higher education in Wales, its wider role in respect of the reputation and standing of the universities in Wales, and a specific request from the Education Minister.
Last November, BBC Wales revealed that a Malaysian college was run by Fazley Yaakob, a pop star with two bogus degrees, while another in Bangkok was operating illegally.
The QAA judged that the university's approval of a fashion college in Thailand was "inadequate" and "flawed".
It also reported that the University of Wales staff member sent to inspect the college had no recollection of being there.
Prof Gummett writes that: "There has been no lack of advice, formal and informal, from within and without the university, in recent years on the risks that it has been facing, which makes the current position all the more troubling.
"It is clear that despite all this advice, there has been a significant failure of central processes, and of oversight of these processes by senior management and the council.
"An urgent and effective response is needed in order to address the reputational damage to the university itself and to all Universities in Wales."
A copy of the letter from Prof Philip Gummett was obtained by BBC WalesThe University of Wales said its chairman was "in receipt of the letter and wishes to make no comment until he has put the matter before a meeting of the University of Wales Council."
Following the publication of the watchdog's reports the university conceded that the way it currently validates overseas colleges was "no longer fit for purpose".
It is the second blow in a week for the university after plans for a re-birth of the institution in the form of a 'super-university' were scuppered when Uwic pulled out of merger talks.
The proposals would have made it the third largest university in the country, but Uwic said it was "dissatisfied with a lack of attention to good governance, due process and administration" in the discussions.
A Welsh Government commissioned report said in March the university, which was founded in 1893, should shut down unless it could change radically.
A spokesperson for the Welsh Government said: "The minister has raised serious concerns about the damage caused by the failings of the University of Wales to the reputation of Welsh higher education internationally.
"We have asked HEFCW to report on what scrutiny has been undertaken by the governing body of the University of Wales concerning the international activities of the university over the last two years, this letter is part of that process."
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