Warren Buffett: Auditors failing to track potential derivatives 'time bomb'

Warren Buffet has warned that banks' holdings of derivatives can be so difficult to evaluate that auditors may not be capable of finding hidden risks, calling it a "potential time bomb in the system," and making investment in most large financial firms unattractive. He also warned that he regarded very large derivative positions as "dangerous."

WARREN Buffett said banks’ holdings of derivatives make it unattractive to invest in most large financial firms and that the contracts still contain hidden risks.

“Some of these things get so complicated that they’re very hard to evaluate,” Buffett said Saturday during the annual meeting of his Berkshire Hathaway Inc. in Omaha, Nebraska.