THE acquisition of the Overseas Trust Bank by the Malaysian Guoco Group in July heralded an end to the Hong Kong Government's inherited banking problems from the near-collapse of the industry in the mid-1980s. The OTB was the last of the ailing banks which, as a result of poor regulations, were taken over or acquired by the government and stronger commercial banks. The government took over three banks - the Hang Lung Bank, the Hong Kong and Industrial and Commercial Bank in 1983 and the OTB in 1985. But the deal, which resulted after a year of negotiations, was not without controversy. Guoco, which also owns the Dao Heng Bank, paid an estimated $4.8 billion for the OTB. This netted the government a nominal profit as it was later revealed it had pumped almost $4 billion into the bank to keep it going. The Dao Heng Bank absorbed the government-run Hang Lung Bank in 1990. The acquisition of OTB reportedly makes Guoco the third largest capitalised bank in Hong Kong. It was funding the purchase through a share issue and a syndication loan. In August, the government moved to counter claims the public, as owners of the OTB, had been kept in the dark throughout the sales process. The government, which said the money came from the Exchange Fund, also revealed that $1.7 billion of public money had been used to save the Hang Lung Bank from liquidation. The deal took a new twist in August when the Securities and Futures Commission began an inquiry into Guoco's sudden share price surge before its formal acquisition of the OTB. The official announcement that Guoco had outbid other candidates for ownership of the OTB was not revealed until July 23. But the share price jumped on July 12 from its close of $20.10 the previous day to $20.80 by day's end, hitting a high of $21.40. Its warrant also increased from $5.35 to $6.80 on that day. There has been no further statement from the Securities and Futures Commission on the share trading.