The collapse of the Overseas Trust Bank, and its rescue by the Hong Kong government on Friday, gave fresh ammunition to those in the British colony pressing for reform of the financial supervisory system.

Even as the Legislative Council passed an emergency bill putting Overseas Trust -- with deposits of about $1.3 billion -- under government ownership, recommendations for tightening control over lending and capitalization of banks were under review by the colony's banking commissioner, Robert Fell.

Among the issues raised in the current debate over banking reform were the possibility of establishing a depositors' insurance scheme and the improvement of the bank reporting system.

With 141 banks, 33 licensed deposit-taking companies, 307 registered deposit-taking companies and 119 representative banking offices, Hong Kong has become the world's third-largest financial center after London and New York by virture of its laissez-faire financial policies.

However, government intervention in the last two years could permanently change Hong Kong's free- wheeling image.

In the fall of 1983, political uncertainty about Hong Kong's future under Chinese sovereignty after 1997 prompted the financial secretary, Sir John Bremridge, to link Hong Kong's currency to the U.S. dollar in a monetary package keeping the exchange rate within a narrow trading band of 7.7 to 7.8 Hong Kong dollars to each U.S. dollar.

In the same period, Sir John stepped in with an emergency bill to rescue the Hang Lung Bank from collapse, the first time the Hong Kong government had been forced to assume responsibility for a financial institution.

A large bank with 28 branches, the Hang Lung had been the subject of a run in 1982, and was linked with a failed registered deposit-taking company, Dollar Credit and Financing.

Last Friday, Fell said that although the Hang Lung takeover and the OTB rescue were separate cases, "there are possible strings that go through several failures in Hong Kong . . . so much of the problem comes back to the banking boom and bust."

Fell was referring to the property and bank credit boom of 1979-82 that led to the eventual collapse of a number of property companies, the most notable being the Carrian Group, with losses of over $1 billion.

Since 1983, the government has launched its current review of financial supervision and banking practices, and consultations with bankers here will result in proposals later this year from Fell for legislative changes.

Some financiers think that because of increasing sophistication in international banking, coupled with the imminent influence of China's conservative banking policies, Hong Kong will never be quite the same.

Sir John praised the Hong Kong police, who apprehended four people in connection with the Overseas Trust Bank collapse. OTB Director Patrick Chang and two senior officials were charged in connection with fraud that the government said totaled "hundreds of thousands" of Hong Kong dollars.

Fell said the bank's problems can be traced to a series of loans it made to Simon Yip, a Hong Kong businessman who acted as the honorary consul in Hong Kong for the Dominican Republic. Yip's deposit-taking company was closed by Hong Kong authorities in April following investigations by Dominican Republic officials.

Yip and his son were alleged to have abused their consular privileges and run an investment company out of the OTB building to siphon Hong Kong funds to the Caribbean at the height of the political jitters over the transition to Chinese control in 1997.