Exclusive: Japan regulator to check banks' readiness for emerging market swings - sources

TOKYO (Reuters) - Japan's financial regulator plans to check if the country's banks and other financial institutions are prepared to deal with any impact from sharp swings in emerging markets, sources with direct knowledge of the matter told Reuters on Wednesday.

This readiness is expected to be a key part of the annual oversight policy for the Financial Services Agency (FSA) during its business year that started in July, said the sources, who did not want to be named as they were not authorised to discuss the matter that is expected to be announced within days.

FSA's move reflects growing concerns about a potential fallout from market turmoil in emerging economies such as Turkey, whose lira currency has plunged 40 percent this year on concerns about the credibility of the central bank.

The agency will check major banks', such as Mitsubishi UFJ Financial Group, risk management and compliance in their overseas operations, the sources said.

The FSA will also monitor the sales practices of banks and deter potential abuse by lenders selling financial products, they said.

An FSA spokesman declined to comment.

(Reporting by Takahiko Wada; Writing by Taiga Uranaka; Editing by Himani Sarkar)