DNB and Nordea has received unconditional clearance from the European Commission to merge their operations in Estonia, Latvia and Lithuania, the banks said.

"The European Commission approved unconditionally the creation of a joint venture between Nordea Bank and DNB Bank in the Baltic states," the banks said in a press release. "The Commission assessed the possible competitive effects of the merger on a number of distinct retail and corporate banking markets across the three Baltic countries and concluded that the merger would not raise competition concerns."

The transaction, which will result in the establishment of the new joint bank Luminor on the Baltic market, is subject to regulatory approvals. Closing is expected to occur in the final quarter of 2017.

Customer accounts and payment processing will be maintained in the two separate existing core banking systems until customers are migrated to one common core banking system in each Baltic country.

In November 2016, Erkki Raasuke was appointed CEO and Nils Melngailis chairman of the supervisory board of the new joint bank. Luminor, which intends to focus on local businesses, stands to emerge as the second-largest bank in the Baltics, with an estimated market share of 20 percent.