The proposed merger between Nationwide and Virgin Money will be investigated by the UK competition regulator.
The country's largest building society announced a £2.9 billion deal with a smaller rival in March.
It is the biggest bank merger since the 2008 financial crisis and will create Britain's second-largest mortgage and savings lender.
The Competition and Markets Authority (CMA) said it would investigate whether the measures would lead to a significant lessening of competition in the UK banking industry.
The acquisition will give the combined banking group 700 branches, making it the second largest bank after Lloyds Banking Group.
The combined assets of the two groups are approximately £366.3 billion.
Virgin Money is currently the UK's sixth largest retail bank with around 6.6 million customers, while Nationwide has around 18 million customers.
When the deal was struck, Nationwide said it would not make any significant changes to Virgin Money's 7,300 employees “in the near future”.
The company said it would initially continue to use the Virgin Money brand but would phase it out over six years once the proposed acquisition was complete.
Last week, Virgin Money shareholders voted in favour of Nationwide's takeover bid, despite concerns from some investors that the deal could “leave shareholders extremely short”.
The CMA has set a 40-day deadline for the first stage of its investigation.
During this initial period, the CMA will assess whether the transaction constitutes a “relevant merger situation” and whether it is likely to lead to a significant lessening of competition.
The CMA is inviting comments from interested parties, with the consultation period closing on 14 June.
The outcome of this investigation will be crucial in determining whether the Nationwide-Virgin Money deal can go ahead without amendment, or whether further scrutiny and potential remedies are needed to maintain competition in the market.
