I'm also not convinced that factions totally collapsing due to attrition from field battles is necessarily even a good thing. Is it more historical? Sure, but the player is currently much too strong in field battles compared to the AI and it would be trivial to ride around slaughtering npcs until they run out of money and then go clean up the fiefs afterwards. In my opinion, attrition should happen on a sliding scale that doesn't bottom out, but still lessens the resistance faced when sieging, etc.
It isn't difficult to test what happens when serious field losses have a more lasting impact on faction strength: the Snowballing(tm) happens right from the beginning of the game and without the player being involved at all. That was the state of the game on release. There isn't a meaningful difference between not being able to field parties because looters keep beating your lords or not being able field parties because you're broke. The end result is the same.
We'd need another system to counteract that tendency if there is going to be meaningful player agency in the late-game.