The intention of this dissertation was to explore the financial regulatory environment and analyze whether or not it creates a suitable ecosystem for the fostering of IT innovation. The literature suggested that IT experienced a great deal of difficulty in delivering innovative solutions to business requirements with a large proportion of their budgetary and manpower resources tied up in meeting regulatory requirements and dealing with a variety of auditors both internal and external. Furthermore the literature indicated that the high level of complexity of regulations as well as their ambiguity and sometimes conflicting requirements meant that for IT dealing with regulations in a coherent and efficient manner was difficult. All of this seemed to leave IT with very little room to deliver solutions in an innovative manner. On the other hand the literature also suggested that there was some benefit and competitive edge for financial organizations to meet regulations faster or better than competitors. The research however paints a less clear cut picture. It suggests that the budgetary and manpower constraints alluded to in the literature may not me as pronounced or crippling as they might seem. While there is a great cost to the business for regulatory compliance this cost lies with the business line which needs to enact the regulation not with IT. While IT might enact the solution they bill out the cost internally to the relevant business line. The question is also posed in the research as to whether there is a requirement for IT to innovate at all. While there is certainly a requirement for them to support innovative solutions developed by the business for customers the regulatory environment is not conducive to non-standard or boutique solutions which have the potential to increase operational risk and in turn regulatory scrutiny. Having said this much of the research does support the conclusions made in the literature with IT having difficulty understanding complex regulatory requirements and a lack of support from both internal and external sources to do so. While there is certainly a requirement for innovation in the finance sector as in any other industry the environment is quite hostile to change or heterogeneity of any kind. This leaves IT with a very challenging task.