As part of the approval, the regulator ordered UniCredit to sell up to 180 branches, asked it to cut costs for its clients, reduce its stake in Mediobanca SpA and sell its entire stake in Assicurazioni Generali SpA.
The Trieste-based insurer Generali is the main industrial partner of UniCredit's main domestic competitor, Intesa Sanpaolo SpA.
UniCredit's all-share offer for Capitalia worth 21.5 billion EUR(US$29.61 billion) has been approved by shareholders of both banks as well as Italy's central bank. The deal is to take effect Oct. 1.
The new bank will have a market capitalization of more than 81 billion EUR(US$110.64 billion), second in Europe only to HSBC Holdings PLC.
Since the arrival of Bank of Italy Governor Mario Draghi in January 2006, the Italian banking system has changed significantly. Eight banks have been involved in mergers, speeding up the long-awaited consolidation process that has reduced the number of financial institutions in the country.
Still, with more than 700 banks, Italy has one of the most fragmented banking sectors of the euro zone.
Mediobanca is also a major shareholder in Generali - which would give UniCredit heavy sway over control of Generali. People are worried that it would give UniCredit a disproportionate control over Italy's financial sector.
Shares of UniCredit closed up 3 percent at 5.92 EUR(US$8.21) on an overall positive market.
Russia, when signing documents for the sale of Alaska to the United States, was realizing her objective benefit
Putin's official spokesman Dmitry Peskov commented on remarks in the US media about failures in launching nuclear-capable missiles in Russia