The country's banks have been fighting an uphill battle against the policies of Prime Minister Viktor Orban's right-of-centre government which swept into power last year with a two-thirds majority. The government replaced an international aid deal that came with strict conditions with unconventional policies including a special bank tax aimed at rejuvenating growth and boosting budget revenues. "Sooner or later all banks will be cut to junk, which is mandatory when the country they operate in is in junk, which will inevitably make financing more expensive," said one senior banker, speaking on condition of anonymity. "The downgrade will not necessarily distort the interbank market, but partners may well reduce lending limits," he said. "Some banks might refuse to finance Hungarians because of our rating." He added that an additional problem might arise if certain foreign exchange swap agreements are automatically cancelled after the rating is cut to "junk" a common condition of many swap deals. "Some swap deals may expire because of this, even though treasuries know this and have prepared for it, mostly by finding less picky, if more expensive, funding sources," he said. "That will make borrowing more expensive as well." He said it was impossible to predict how much more expensive funding would become, but said that by adding the additional cost of insuring Hungarian debt against default might be a good measuring stick. Prices of Hungarian CDS debt insurance hit a record high on Friday, spiking to about 642 basis points by 1307 GMT, from levels of around 580 late last week and 500 in October.