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This study aims at finding the best set of financial ratios that can be used to predict the faltering of banking institutions and the distinction between stumble and un-stumble ones in order to identify the conditions of those institutions earlier, allowing interested parties and regulators to intervene to take appropriate Corrective action on time. The researcher used the method of statistical analysis of linear multi-discriminatory variables (Stepwise Analysis) to find the best set of financial indicators that can be used in building this model so that he can distinguish between the hindered banking institutions and other ones two years ahead of stalemate. Financial ratios have been calculated for a sample of eight banks, half tripped and the other half them is not yet done, and that’s for the period between the years (1997-2007). The following proposed model was reached: Z =326.940A8 +37.810A11- 14.905A1-7.261A22-2.347. Test of the model has been done by using financial ratios derived from the sample data analysis and it was found to be able to predict the distinction between stumbling and non-stumbling banking institutions with an accuracy (75%, 75%, 62.5%) in the first, the third and the fourth year, respectively before faltering.