John Hutton, secretary of state for business and enterprise, will lay the necessary Affirmative Order in Parliament when the House returns after the summer recess.
There had been a number of concerns yesterday that any possible merger could be blocked by rules surrounding competition.
The combined group will have a mortgage market share of around 30% with combined assets in the realm of £30bn.
But under Section 42 of the Enterprise Act 2002 the Secretary of State can extend public interest grounds.
Currently public interest grounds cover only plurality of media ownership and national security.
His decision follows advice from the UK tripartite authority (HM Treasury, Bank of England and the Financial Services Authority).