The Australian Prudential Regulation Authority is investigating Woolworths after it labelled its credit card business a banking service on its website.

But APRA chairman Wayne Byers went easy on the retailer when questioned at a Committee for Economic Development lunch at the Hilton Hotel in Melbourne.

''It's not the first time, it won't be the last time,'' he said, when asked if he was surprised that a major company could make such a mistake.

''The words 'bank' and 'banking' are protected words under the banking act ... given they are generic terms it is not uncommon that we find people using them. Non-bank institutions that are starting to venture into financial services will inadvertently use the term.

''When we're alerted to these things, we point out the relevant sections of the banking act and people stop using them.

''There are instances when you can use them, such as blood banks when there is no implication that you are conducting a financial business, but otherwise these words are protected and need to be carefully used.''

Mr Byers also discussed risk, the concept of ''too big to fail'' and the use of counter-cyclical tools by banks.