Veteran investor Warren Buffett has warned he is seeing ‘signs of fragility’ emerge in the banking system — noting that stability of the financial system should be a high priority for the Federal Reserve. The former Berkshire Hathaway CEO stressed the need for caution even while markets appeared relatively calm and said his biggest concern would be about preserving the credibility of the US dollar.

“I wish they had a zero inflation target….once you start saying you’re going to tolerate 2%, that compounds pretty dramatically over time. And you’re saying to people, if you’re getting less than 2% on your money, you’re going backwards. And, actually, if you pay tax, you may pay tax on the 2%. You know, I mean, I don’t like that particular goal,” he told CNBC during an interview on Tuesday.

Buffett noted that banks such as JPMorgan Chase were crucial cogs in the economy that shepherded trillions of dollars every day. He described the financial system as both “very strong” and “very fragile” — cautioning that interconnected risks across traditional banks, shadow banking, and private credit markets could spiral quickly during a crisis. Buffett cited the 2008 financial crash to remind how panic could spread rapidly when confidence shatters.

Investors have been rattled after a series of recent blowups in credit markets sparked fears that risks are brewing on the balance sheets of both banks and private credit funds. Buffett opined that many investors would likely rush for the exits if true panic swept through the markets. His cautious stance has also led Berkshire Hathaway to amass a record-shattering amount of cash and equivalent short-term Treasuries over the past few years.

“I don’t know the exact number, but it’s not much different from before. So you know, it’s probably north of $350 billion in cash and treasury bills. We bought 17 billion of T-bills this week,” Buffett told CNBC.

But the Oracle of Omaha — despite his reputation as a legendary investor — remains wary about attempts to predict the market. He opined that such investors were often “selling something” and criticised the growing popularity of speculative bets. Buffett likened today’s financial markets to a “casino” that also happened to be attached to a fundamentally strong economic system.

“You have this incredible cathedral called the American Economic System. Nobody’s seen anything like it. I mean, it’s the cathedral of all cathedrals. But attached to it is a casino, and people can walk back and forth between the two. And believe me, people like to gamble….The American capitalism system works and betting against the house does not work. I mean, it’s just — it’s so simple. But, people like to gamble,” he added.