For what reasons can a priest be removed of his priestly faculties by his bishop?
There are basically two reasons.
The first is if the priest suffers from some kind of mental illness, or something like that, that would make it imprudent for him to continue celebrating the sacraments (for example, advanced Alzheimer’s disease). That is, obviously, not a sanction or punishment, but just a safeguard for the validity of the sacraments.
The other reason is if the priest has committed a crime under Canon Law, or some other serious transgression. There are different degrees of severity:
*]His faculty to hear confessions could simply be revoked.
*]He could be suspended, which means that he remains a member of the clergy, but he is prohibited from doing any public ministry. (Note that suspension is a punishment: it can only be given after a priest has been found guilty of some crime. It is not at all the same as so-called “administrative leave,” which nowadays priests suspected of a crime are placed on.)
*]He could be given a more serious penalty, such as interdict or excommunication, which would also prevent him from exercising his faculties.
*]He could be laicized (considered no longer a member of the clergy), which also has the effect of not having faculties, in this case, permanently. Laicization can be sought by the priest himself–in which case it is not a punishment, obviously–or else it can be imposed as a penalty for a very grave crime. (Note that priests can never stop being priests; they can only be prohibited from doing ministry and being enrolled among the clergy.)
A third would be if he asked to be laicized.