Tripartite financial regulation was not to blame for the Northern Rock "catastrophe", the former governor of the Bank of England, Lord Eddie George, said in Edinburgh yesterday.

However, he said the original close relationship between the central bank and its former employees the banking regulators in the Financial Services Authority was critically important and "has perhaps weakened" since the split 10 years ago.

He also admitted he was "upset" at the time about the split, because he had not been consulted about it, but said he supported it in principle.

George, giving the keynote address to the investment conference of the National Association of Pension Funds, said Northern Rock was "an extreme case of overdependence on the wholesale money and debt markets for liquidity" but said: "I don't see how you can realistically expect the regulator to foresee what happened when the management didn't."

He went on: "The regulator seeks to set minimum standards that reduce the risk of a bank failing, but they can't guarantee that banks can't fail and they don't actually run the banks."

He said criticism of the central bank for not acting more promptly and discreetly was unrealistic. "The uncomfortable fact is that the buck stops primarily with management and with shareholders, that may sound hard but if you move away from that the authorities will end up managing the entire financial system."

The collapse of Barings in 1994, the former governor said, had produced a positive effect in prompting banks around the world to tighten up their controls "although I have to say the recent experience with SocGen and Jerome Kerviel is an uncomfortable reminder that these lessons can easily be forgotten".

George said it had been a "really harrowing time" in financial markets but he was optimistic about a return to global financial stability, largely because of the political consensus that had emerged during the 1980s and 1990s about how to manage economies.

"We may well have a fairly bumpy ride over the rest of this year but the storm will gradually blow itself out."

Partha Dasgupta, chief executive of the Pension Protection Fund (PPF), told delegates that the PPF's barometer of pension scheme funding had slid from an aggregate £100bn surplus in June last year to a £100bn deficit at the end of last month.

However, the schemes which were actually in the red had recorded a steady £100bn deficit since 2005, and arguably the PPF would be left shouldering even more risk if well-funded schemes began to offload their liabilities to insurers and buy-out companies, quitting the PPF.

Dasgupta accepted that the current £675m levy on pension schemes was still a "blunt tool" which could penalise prudence.

He said later: "What is unfair is where SMEs who are managing their affairs properly are cross-subsidising some of the people who have the biggest risk appetite."

Jon Moulton of Alchemy Partners, leading a debate on private equity, said: "We were hammered in the media, we were called locusts we have got plenty of enemies, the trade unions don't like us and don't really know why, they can't actually show we are any worse than private companies at running them, and there is politicians' envy. Fortunately, the spotlight has switched away to the vast bonuses of the bankers."

He went on: "The way we are paid is much better, we are mostly paid out of long-term incentive, we have to actually perform to make serious money over a long period, not knock out a quarter's profit."

Sir David Walker, author of the recent private equity review, said the key issue was now reliable performance data for the industry.