* Change would see banks placed into different bands
* Government to consult on changes this month
* Critics say levy puts London at a disadvantage
* Levy rate has been raised seven times since 2011
By Matt Scuffham
LONDON, March 19 Britain is considering changes to its three-year-old bank levy after failing to raise as much as expected from the tax, which some banks have said unfairly penalises lenders with big overseas operations and those that are not selling assets.
In his annual budget statement on Wednesday, Chancellor George Osborne said that the government would consult on possible changes to the levy which would see banks put into different bands with each band charged a set amount.
The tax has never raised the 2.5 billion pounds ($4.1 billion) a year which the government targeted when it was introduced in 2011, despite the rate being increased seven times, because banks' downsizing has meant less profit to tax.
Osborne said in December he would raise the levy rate imposed on banks' assets this year to 0.156 percent from 0.142 percent previously and widen its scope to address the shortfall.
The government said on Wednesday that, under the proposed changes, the amount expected to be raised this year would not change. The amount would rise in coming years, it said.
Britain is expected to raise 2.3 billion pounds from the levy this year, according to government data, compared with 1.6 billion in each of the two previous years.
The Office for Budget Responsibility reiterated on Wednesday its target to raise 2.7 billion pounds in 2014/15 and 2.9 billion in each of the four subsequent years.
HSBC, Europe's biggest bank, has been hardest hit by the levy, paying out $904 million last year, up $321 million on the year before. HSBC said more than half its payment last year was on non-UK banking activity.
The Treasury will publish a consultation document on the issue on March 27 and any changes to the levy will not be implemented before next year.
The levy applies to the global balance sheets of UK banks such as HSBC, Barclays, state-backed Lloyds Banking Group and Royal Bank of Scotland as well as assets of UK operations of foreign banks.
Standard Chartered, which makes more than 90 percent of its profits in Asia, Africa and other emerging markets, paid $266 million last year, up from $174 million in 2012.
Barclays paid 504 million, up 46 percent on last year, while UK-focused Lloyds and Royal Bank of Scotland saw more modest increases to their payments.
Overseas banks with big London operations, such as JPMorgan and Goldman Sachs, also pay sizeable sums.
Critics say the levy is damaging London's standing as a financial centre.
"The UK is the only country hosting a leading financial centre which has a bank levy. A global consensus on bank levies seems further away than ever, putting London at a disadvantage when competing for global banking business," Peter Maybrey, banking tax partner at PricewaterhouseCoopers, said. ($1 = 0.6034 British pounds) (Editing by Louise Ireland)