Yes the vasall clans, but the ruling clan (which in my case had 5-8 Lords or Ladys) stays and hires mercs and is harassing former faction land forever.Once they have no Cities of castles they should automatically look to another faction to join or have there chance of death in battle vastly increased. Or maybe once they put in a dungeon they stay there.
I was Battania and Lord of Omor and Balgard, between these two and Sibir, they always seem to hang out (Sturgia remnants), and they plunder my villages with 10-20 men. I didnt want to execute all because that ruins relations even in my faction.
So destroying faction + message like in good old warband should be there. I mean there is already a mod for that, but this is pretty basic stuff which should be there by default.