When Senate Banking Committee Chairman William Proxmire (D-Wis.) retires from Congress in 17 months, opponents of financial service deregulation will lose a powerful voice, industry and government leaders agreed yesterday.

Proxmire, who announced yesterday he will not seek reelection in the fall of 1988, will depart at a crucial time for the banking industry, which is undergoing a rapid restructuring as its members struggle to enter the securities, insurance and real estate industries.

The announcement comes just weeks after Federal Reserve chairman Paul A. Volcker stepped down as chief of the nation's central bank. Volcker and Proxmire, two of the most powerful federal overseers of the financial service industries, have been the most influential opponents in government of the Reagan administration's efforts to relax the 50-year-old laws separating banking from the securities industry and other types of businesses.

"The Senate will be a lesser place without him," said current Fed Chairman Alan Greenspan. Greenspan said that while he and Proxmire have had their differences over the years, "I have never questioned his integrity or his competence." That view was echoed by many top government officials of both parties, including Treasury Undersecretary George Gould, who is chief administration spokesman on banking deregulation.

Adding to the uncertainty created by the departure of Proxmire and Volcker will be continuing questions about whether House Banking Committee Chairman Fernand St J. Germain (D-R.I.), who is under investigation by the Justice Department for possible entertainment expense improprieties, will be fully effective during the next year.

Proxmire this year helped achieve passage of the first major banking bill in five years. The bill freezes the current hodgepodge of banking powers while Congress considers how to permanently change the system. That second bill is expected to address just how far bank companies may engage in securities underwriting.

In addition to that challenge, Proxmire has promised to pass legislation to restrict hostile business takeovers and to limit insider trading. Industry analysts and others said yesterday they think Proxmire's lame-duck status won't hamper his effectiveness in pushing for either of those bills. They say it may even help him push through banking legislation if legislators see it as a tribute to his 30-year service in the Senate.

In a telephone interview yesterday, Proxmire said he is optimistic about the banking bill.

"I think we really have momentum on this," he said. "From everything I hear ... we'll have a good fighting chance in {the banking} committee and it looks better on the {Senate} floor." He was less optimistic about the chances for passage of a banking bill in the House, but on the positive side noted that his takeover legislation is cosponsored by 10 of the banking committee's 20 members.

Proxmire leaves the banking committee after two terms as its chairman. He headed it from 1974 to 1980, lost his position when the Republicans gained control of the Senate that year, and regained it when the Democrats won back the Senate in the 1986 elections. Proxmire also chaired the Joint Economic Committee twice, in 1967-68 and 1971-1972.

Proxmire adhered to a midwestern populism that favored giving a break to the unsophisticated bank customer by increasing disclosure of loan terms and charges. But he also realized that sweeping regulatory and technological changes in the banking system meant the old way of regulating the industry had to be modernized.

"There were a lot of bankers who were worried sick about Sen. Proxmire {when his tenure began} who are going to be sorry to see him go," said Kirk Willison of the American Bankers Association.

It was not immediately clear who would succeed Proxmire as chairman of the committee. Sen. Alan Cranston (D-Calif.) is next in seniority, but would have to give up his chairmanship of the Veterans' Affairs Committee. He could retain his position as Senate Majority Whip. Next in line for the banking committee chairmanship is Sen. Donald Riegle (D-Mich.).

Cranston was out of the country yesterday and could not be reached for comment, but several congressional banking aides said they think Cranston will get -- and accept -- the chairmanship if the Democrats retain control of the Senate in the 1988 elections. Riegle would not comment on his prospects for taking over the committee.

The ranking Republican on the committee is Sen. Jake Garn (Utah).

Although banking industry leaders said Proxmire would likely get a banking bill passed during this Congress, they were doubtful the legislation would be as sweeping as he originally had intended.

Staff writer Helen Dewar contributed to this report.