Despite Tory opposition, the Banking (Special Provisions) Bill was given a second reading by 367 votes to 164, a majority of 203.

The Bill, which provides for the troubled bank to be put into temporary public ownership, will undergo immediate detailed line-by-line committee stage examination.

It is expected to complete its Commons stages just after midnight before moving to the Lords on Wednesday with the aim of it becoming law by the end of the week.

Chancellor Alistair Darling defended his decision to rush the legislation through Parliament insisting it was impossible to run a bank unless it was clear "who is in charge".

Faced with concerns about unfair competition from other banks, he disclosed that discussions would be held with bank and building society associations before submitting proposals for state aid approval by the European Commission.

"We won't be involved in the day to day management of NR. But we do need to approve its business plan. We want to make sure it is prudent, that it's sensible, and protects the interests of the taxpayer. But also we want to make sure it avoids distortions."

Mr Darling, who Tory leader David Cameron has said should be sacked over the banking debacle, indicated shareholders could expect little if anything for their investment.

Compensation for them, he said, will be decided by an independent valuer on the basis that financial support for Northern Rock had been withdrawn.

Mr Darling faced further embarrassment when Liberal Democrat treasury spokesman Vince Cable, who first advocated nationalisation, seized on a BBC report that Northern Rock's new executive chairman, Ron Sandler, is a non-domiciled taxpayer.