Objection 1. It seems that the priest can bind and loose according to his own judgment. For Jerome [Cf. Can. 86, Mensuram, De Poenit. Dist. i] says: "The canons do not fix the length of time for doing penance so precisely as to say how each sin is to be amended, but leave the decision of this matter to the judgment of a discreet priest." Therefore it seems that he can bind and loose according to his own judgment.
Objection 2. Further, "The Lord commended the unjust steward, forasmuch as he had done wisely" (Luke 16:5), because he had allowed a liberal discount to his master's debtors. But God is more inclined to mercy than any temporal lord. Therefore it seems that the more punishment the priest remits, the more he is to be commended.
Objection 3. Further, Christ's every action is our instruction. Now on some sinners He imposed no punishment, but only amendment of life, as in the case of the adulterous woman (John 8). Therefore it seems that the priest also, who is the vicar of Christ, can, according to his own judgment, remit the punishment, either wholly or in part.
On the contrary, Gregory VII [Cf. Act. Concil. Rom. v, Can. 5 says: "We declare it a mock penance if it is not imposed according to the authority of the holy fathers in proportion to the sin." Therefore it seems that it does not altogether depend on the priest's judgment.
Further, the act of the keys requires discretion. Now if the priest could remit and impose as much as he liked of a penance, he would have no need of discretion, because there would be no room for indiscretion. Therefore it does not altogether depend on the priest's judgment.
I answer that, In using the keys, the priest acts as the instrument and minister of God. Now no instrument can have an efficacious act, except in so far as it is moved by the principal agent. Wherefore, Dionysius says (Hier. Eccl. cap. ult.) that "priests should use their hierarchical powers, according as they are moved by God." A sign of this is that before the power of the keys was conferred on Peter (Matthew 16:19) mention is made of the revelation vouchsafed to him of the Godhead; and the gift of the Holy Ghost, whereby "the sons of God are led" (Romans 8:14), is mentioned before power was given to the apostles to forgive sins. Consequently if anyone were to presume to use his power against that Divine motion, he would not realize the effect, as Dionysius states (Hier. Eccl., cap. ult.), and, besides, he would be turned away from the Divine order, and consequently would be guilty of a sin. Moreover, since satisfactory punishments are medicinal, just as the medicines prescribed by the medical art are not suitable to all, but have to be changed according to the judgment of a medical man, who follows not his own will, but his medical science, so the satisfactory punishments appointed by the canons are not suitable to all, but have to be varied according to the judgment of the priest guided by the Divine instinct. Therefore just as sometimes the physician prudently refrains from giving a medicine sufficiently efficacious to heal the disease, lest a greater danger should arise on account of the weakness of nature so the priest, moved by Divine instinct, some times refrains from enjoining the entire punishment due to one sin, lest by the severity of the punishment, the sick man come to despair and turn away altogether from repentance.
Reply to Objection 1. This judgment should be guided entirely by the Divine instinct.
Reply to Objection 2. The steward is commended also for having done wisely. Therefore in the remission of the due punishment, there is need for discretion.
Reply to Objection 3. Christ had the power of "excellence" in the sacraments, so that, by His own authority, He could remit the punishment wholly or in part, just as He chose. Therefore there is no comparison between Him and those who act merely as ministers.
Source: Summa Theologica (New Advent)