"APRA’s mandate is to protect the community by ensuring that, under all reasonable circumstances, financial promises made by the institutions it supervises are met within a stable, efficient and competitive financial system. So a central part of APRA’s work is to ensure that banks limit the extent of their liquidity risk."

Notice it says "all reasonable circumstances". There's a lot of nuance there, and depositors being a small group of VCs who are squeezed on cash and suddenly pulling out all deposits while interest rates are hiking while the bank bet heavily on 10+year MBS isn't the reasonable situation covered here.

> AGS permit a bank to stay fully liquid

AFAICT this only applies if the current fair value of the AGS covers the liabilities. It doesn't in the case of rapid interest rate hikes like in the US. However, it's probably true that in case of a bank run when interest rates are being lowered, bank assets can probably cover liability even if there's a 100% run.

Do note that this is the government institution explaining why the regulatory system makes things fine and people don't need to worry. I don't doubt the system is as robust as is possible, but reading between the lines, it's quite obvious (to me at least) that a SVB-like scenario can still happen in theory under the system. It will just take even more extreme parameters for that to happen (which admittedly doesn't exist in Australia right now, AFAIK).