Lloyds and HBOS will operate around a third of all UK current accounts as a "super-bank" - as well as over a quarter of mortgages.
The merger of HBOS and Lloyds TSB has been officially approved by the Court of Session in Edinburgh.
This means that the new "super-bank", which would form Britain's biggest loans lender, is set to begin trading next week. The court hearing had represented the last stage of administrative approval for the merger, which has largely come about thanks to the banking sector turmoil caused by the credit crunch.
The huge deal was first announced last summer, with banking shares having plunged in value due to investor concerns over the financial sector's stability. Many analysts believe that larger firms are generally better-positioned to ride out downturns than smaller ones - and doubts had also been raised over the state of both banks' balance sheets.
These fears appeared to gain credence with the announcement that both HBOS and Lloyds would take part in the government's £37 billion bank rescue plan, announced in October.
An HBOS spokesman said on Monday: "We welcome today's decision by the Court of Session. This is in the interests of shareholders and customers alike."
The merged bank is set to control around a third of the nation's current accounts and over a quarter of its mortgages, figures cited by news agency Reuters show. Lloyds announced last year that it and HBOS will retain their separate branding on the high street.
