Yes, you can torture someone and lower a stat, at a heavy price to yourself, and only to people in your own prison. Rarely do people captured in battle get tortured. It is almost always reserved for infiltrators committing assassinations and for particularly notorious enemies.
Yes, maybe there could be some intermediate penalty. But a prestige loss? Even being banished from a realm, which is a harsh penalty, doesn't give you a prestige or honor hit.
