Britain's parliament has nationalised Northern Rock after passing legislation last night to permit the government to do so.
The move comes five months after the bank became a high-profile casualty of the global credit crunch.
The Banking (Special Provisions) Act allows orders to be issued for the transfer of all shares in Northern Rock to the government and for an independent auditor to calculate how much money shareholders should receive.
Britain's fifth-largest mortgage lender was rescued by loans of about £25 billion from the Bank of England in September, and the government also stepped in to guarantee deposits.
Prime Minister Gordon Brown's government said the collapse of Northern Rock would have posed risks to the wider financial system and that saving the bank was essential.
The government initially sought a private buyer but rejected two offers last weekend and decided to nationalise the bank instead. The legislation was then pushed through parliament.
Brown has been criticised by the opposition for the way the government has handled the Northern Rock issue and trails Conservative Party leader David Cameron in opinion polls.