SPAIN'S Banco Sabadell has received approval from Britain's financial regulators for its £1.7 billion ($2.7bn) takeover of TSB, increasing competition for the UK's biggest banks.

Sabadell, Spain's fifth-biggest bank, agreed to buy TSB earlier this year, saying it planned to grow it into a significant challenger to Britain's "Big 5" lenders.

British lawmakers and regulators want to break the dominance of Lloyds Banking Group, Royal Bank of Scotland, Barclays, HSBC and the UK arm of Spain's Santander, which together control more than four out of five personal current accounts in Britain.

Sabadell said the Prudential Regulation Authority and Financial Conduct Authority have approved the deal.

Chairman Josep Oliu said: "This is a milestone that enables us to enter a market with vast opportunities."

Sabadell has said it may consider more acquisitions in Britain following the purchase of TSB, which is Britain's seventh-biggest bank.

TSB chief executive Paul Pester said: "With the extra firepower and fresh perspective of Sabadell, TSB will be stronger and even better placed to build on its position as Britain's challenger bank."

TSB, which already has 4.7 million customers, was spun out of Lloyds last year. That came after Lloyds was ordered to sell the business by European regulators as a condition of its £20.5bn bailout during the 2007-9 financial crisis.