Junji Hiwatashi's research while affiliated with Federal Reserve Bank of Chicago and other places

1 Junji.hiwatashi@boj.or.jp , who is Examining Officer of the Bank of Japan, made a speech on this title on December 2001 at the 7 th Capital Market Conference at the Federal Reserve Bank of Chicago. He is requested to write a paper with the collaboration of his colleague, Hiroshi Ashida Hiroshi.ashida@boj.or.jp, Senior Examiner of the Bank of Japan. The aim is that these experiences could be shared with the persons concerned at home and abroad. These opinions are the authors' personal views and do not necessarily represent the Bank of Japan or the Federal Reserve Bank of Chicago. Faults, if any, in this paper are up to the authors. 2 Abstract 1. There are three common and simple questions frequently asked about measuring operational risk. Why is it necessary? How is it possible? What are the challenging issues in putting it into practice? Unfortunately, there are few pieces of paper or books in finding these solutions based on banking practice since measuring operational risk is new challenging topics. 2. Thus, this paper aims to provide readers with possible solutions or at least hints on these three questions based on Japanese banking experiences.