China underground banks did $150 bln in transactions in 2015 - regulator

BEIJING (Reuters) - Underground banks in China did more than 1 trillion yuan ($152 billion) in transactions last year and the government will step up efforts to combat the problem this year, state media said on Saturday citing the foreign exchange regulator.

China's economic slowdown and market volatility have sparked a wave of capital outflows running into hundreds of billions this year, triggering alarms for China's foreign exchange management system.

Zhang Shenghui, head of the State Administration of Foreign Exchange's inspection division, told the official Xinhua news agency his department last year had participated in breaking up more than 60 underground banks suspected of doing more than 1 trillion yuan in transactions.

The regulator will also demand that above-board banks increase their oversight of any suspicious activities, and will also look more closely at securities, insurance and third-party payments providers, Zhang added.

Last year, Chinese police, the central bank and the foreign exchange regulator busted the country's biggest-ever underground banking case involving transactions totalling $64 billion.

($1 = 6.5710 Chinese yuan renminbi)

(Reporting by Ben Blanchard; Editing by Richard Pullin)